Powerful tailwinds are bolstering the demand for services related to telecom infrastructure. Sparked by COVID-19, more people are telecommuting, streaming content, taking online classes, and engaging with others via teleconferencing. Demand has exploded for speed and capacity in residential broadband networks, accelerating the eagerly awaited build-out of 5G. Poised to augment and eventually replace the current 4G network, 5G offers the speed, capacity, reliability, and ultra-low latency required to meet wireless demand for such uses as 4K video, Internet of Things-connected devices, and autonomous vehicles.
Major carriers are setting the stage for the transition to 5G infrastructure and have begun rolling out new 5G solutions. Carriers have also ramped up their capital spending to deliver next-generation speeds. They've invested in 5G spectrum licenses, and now need cell sites and cell site upgrades to deliver 5G capabilities. This will require a massive, multiyear investment that's still in the early stages and is expected to continue over the next 10 years.
"This significant infrastructure investment is creating strong demand for specialized services providers," says Matt White, a managing director in the Harris Williams Energy, Power & Infrastructure Group. "These include engineering and technical services vendors with a telecom focus, and regional or smaller providers of maintenance, installation, and fulfillment services."
White adds that few of these providers possess significant scale: "There's an opportunity for buyers to build a market leader through M&A that can capitalize on the rollout and adoption of 5G in the coming years."
Five Innovative Companies in the Space
Harris Williams' experience shows that the 5G opportunity can take many forms. These five recent clients all offer telecom-related services, yet each has taken a different path to growth.
Market leader for wireless network services in the Southeast U.S.
Tachyon Communication Services, which recently merged with NextEdge, a portfolio company of Bow River Capital, is a leading provider of network infrastructure services across the Southeastern U.S. The company principally focuses on wireless services, with complementary fiber capabilities. It goes to market through four affiliates: NIS, Source Broadband, Summitt Cellular, and Towersource. Through carefully executed strategic acquisitions, Tachyon has evolved into one of the largest specialized providers in one of the most coveted regions of the country.
Drew Spitzer, a managing director in the Energy, Power & Infrastructure Group, says, "Carriers and asset owners prioritize execution and service delivery above all other criteria. Tachyon's best-in-class service delivery, particularly in its core wireless segment, makes it a natural partner of choice as these customers seek to consolidate their vendor base." Tachyon serves as a prime contractor to many blue-chip customers with which it has long-standing relationships that span thousands of individual jobs per year.
The company's proven ability to effectively identify, execute, and integrate acquisitions into the Tachyon platform has also greatly contributed to its growth. Acquisitions have been a critical part of Tachyon's ability to gain scale across the Southeastern U.S. This provides the company with the flexibility and breadth to implement installation and maintenance solutions for customers across geographies with very little lead time.
Provider of turnkey network solutions through best-in-class execution capabilities
ADB Companies, recently acquired by Warren Equity Partners, methodically grew from an underground directional boring specialist to a full-service provider of telecom, utility, and technology infrastructure solutions. The company offers end-to-end services, including network engineering, fiber installation, wireless service, aerial and underground utility contracting, and OSP/ISP fiber optic cable contracting.
“ADB is a great example of best-in-class operating capabilities fueling incredible growth in this sector,” says Spitzer. “Over the past few years, the company strategically expanded its geographic footprint, diversified its customer base, and enhanced its service offering almost exclusively through organic initiatives, becoming a market leader.”
Greg Waller, a director in the Energy, Power & Infrastructure Group, adds: "With solid corporate infrastructure, strategic planning processes, and execution capabilities in place, ADB is well positioned to rapidly scale and take advantage of billions of dollars in industry spend over the next five years."
Preeminent utility service contractor, with a growing presence supporting the 5G build-out
Riggs Distler, which was recently acquired by Centuri Group, a subsidiary of Southwest Gas Holdings, is the leading independent provider of maintenance, repair, and upgrade solutions for utility customers in the Northeast and Midwest U.S. Historically focused on overhead electric infrastructure, the company has expanded its capabilities into smart meters, energy storage, electric vehicle charging infrastructure, renewables, and 5G.
White highlights that Riggs Distler's utility infrastructure expertise is a prerequisite for supporting the 5G network build-out. "In dense geographic areas, telecom companies must leverage the utility infrastructure wherever possible, often laying the 5G network on top of existing utility towers and poles," he says. "Given this overlap, we are seeing more and more utility service providers expanding beyond their core focus to support telecom infrastructure work."
Nationwide provider of telecom services capitalizing on opportunities in the public markets
QualTek is a one-stop provider of infrastructure services for the 5G wireless, telecom, and renewable energy sectors. Through a combination of acquisitions and strategic market expansion, the company rapidly expanded its service reach throughout the continental U.S., gaining differentiated scale in a highly fragmented industry.
QualTek and Roth CH Acquisition III Co., a publicly traded special purpose acquisition company, recently announced the signing of a definitive agreement for a business combination that will result in QualTek becoming a public company. Spitzer points out that "QualTek exemplifies that the public markets see opportunity in telecom build-out. The long-term outlook for 5G is incredibly strong, and investors recognize businesses like QualTek will be well positioned to take advantage of the upcoming spending.”
As a public company, QualTek will have access to capital that will enable management to accelerate organic growth and fund additional acquisitions to bolster its market presence. “QualTek has a long history of acquiring highly complementary businesses and leveraging its proprietary technology platform to improve their capabilities,” adds White. “Having additional capital as a public company will be a huge catalyst for future M&A.”
Network Wireless Solutions
Supporting the 5G build through supply chain solutions and logistics
Network Wireless Solutions, recently purchased by Grain Management LLC, is a full-service distributor of materials and logistics solutions for constructing, maintaining, and upgrading cellular towers in the wireless telecommunications industry. The company provides custom fiber optic, copper, or hybrid connectivity technology solutions to connect radios and other equipment. It also distributes a broad array of mission-critical consumable construction materials required for cell tower maintenance, upgrades, and new builds.
What sets NWS apart is its ability to reduce complexity in customer supply chains, rapidly fulfill complex orders on short notice, and provide exceptional quality and highly dependable service. It is a very focused and customer-centric organization. Bob Baltimore, a managing director in the Specialty Distribution Group, says, "The team understands a customer pain point and creates a solution in a high-touch, solution-oriented, agile way. As a result of this approach, NWS has become integral to the operations of its customers and to their ability to meet build schedules."
NWS's in-house engineering capability is another important differentiator. Its expertise and experience are core to its ability to solve the challenges customers face with building networks, upgrading equipment, or bringing on new OEM equipment. NWS engineers are often in the lab with the customer designing the optimal solution. They then procure and source all the raw materials, manufacture and assemble through a third-party manufacturer, and get the solution to the customer. Learn more about NWS here.
Fragmentation + Growth = Buyer Interest
Besides supporting the 5G build-out, what do these companies have in common? All have a track record of growth and deep customer relationships. Many provide end-to-end services and have a leadership position in a specific geography. And, of course, all have garnered strong buyer attention.
"Harris Williams is seeing strong demand for top-quality assets as investors look for ways to capitalize on 5G tailwinds," summarizes White. "There is interest from both private equity and strategics looking for ways to play the tremendous momentum in this sector."
Our Energy, Power & Infrastructure Group focuses on the technologies, services and products that support critical infrastructure. With dedicated coverage across its markets, our team has executed transactions throughout infrastructure; utility services; environmental services; energy management; renewables and distributed energy; test, inspection, compliance and certification; engineering and construction; and energy technology markets.
The Harris Williams Specialty Distribution Group has experience across a variety of business models as well as endmarkets. Our firm has a long-standing track record of success selling specialty distribution companies. We have deep relationships with the key financial and strategic buyers coupled with an understanding of the value chain that enables us to provide superior outcomes for our clients.
Relevant Harris Williams Transactions
For a deeper discussion on 5G infrastructure M&A, please contact us.
Drew G. Spitzer | Managing Director, EP&I Group
Matt White | Managing Director, EP&I Group
Greg Waller | Director, EP&I Group
Thomas Saunders | Vice President, EP&I Group
Bob Baltimore | Managing Director, Specialty Distribution Group
Graham Gillam | Managing, Specialty Distribution Group