Agent and Reseller M&A

GTT Communications just acquired UNSi for $40 million. GTT is an interesting company. Interesting in how they put makeup on. There are numerous descriptions of the company:

This from Reuters: “GTT Communications, Inc., formerly Global Telecom & Technology, Inc., is a global network integrator providing a portfolio of Wide-Area Network (WAN), dedicated Internet access and managed data services. The Company combines multiple networks and technologies, such as traditional OC-x, MPLS and Ethernet, to deliver solutions.” (Probably the most accurate since GTT really is just a reseller of networks).

This from NASDAQ. (GTT is traded on NYSE.) “GTT Communications, Inc. is a Delaware corporation which was incorporated on January 3, 2005. GTT operates a global Tier 1 IP network with one of the most interconnected Ethernet service platforms around the world. We provide highly reliable, scalable and secure cloud networking services. Our clients trust us to deliver solutions with simplicity, speed, and agility. Our Customers As of December 31, 2013, our customer base was comprised of over 2,000 businesses.” The operates a global network is correct.

So GTT buys another reseller in UNSi. This isn’t GTT’s first acquisition as Ramblings chronicles here.

UNSi is another interesting entity. UNSi bought Airband, a fixed wireless operator. It mainly deals in reselling MPLS and Ethernet. The interesting part is the Derby Agency deal in 2012. The Derby Agency is Sherman Henderson’s move after Lightyear Networks. Derby had an equity play similar to the TNCI deal that involved UNSi, Star2Star, RapidScale and PGi. It looks like the UNSi deal will be profitable for a few people.

It looks like the whole CLEC playbook has changed. Resellers aren’t doing well unless they have an underlying business – like LD minutes to rely on. CLECs are building or buying fiber assets — anything to add assets to the balance sheet. With fiber, the margins are better than buying “wholesale” from ILECs or MSOs. Quite a few CLECs have changed to cloud providers or full service providers (ISP, HPBX, IT). This won’t be the last merger we see in 2014.

“CarrierSales and Communication Management Services (CMS) announced on Wednesday that they are joining forces, bringing a significant portion of CMS’ assets and operations into CarrierSales,” as reported by Channel Partners online. Richard Murray, president and CEO of CarrierSales, will run the show. It looks like the Saxby move earlier this year may have anticipated this merger.

Because almost all master agencies are private, most of this M&A doesn’t make the news. I thought we would see a lot of master agencies merging for a couple of reasons: (1) the industry is in a state of flux but the quotas continue to increase which is a recipe for disaster; and (2) many of the owners who have been in business since before 2001 are older and either thinking about retirement or planning an exit to the next venture.

Master agencies have been hiring carrier folks often in the last 18 months. Think about that (I’ll wait). The entrepreneurial agent is hiring a Bell-head. However, when you want to scale and morph into a VAD, you need P&L familiarity, more structure (systems, processes), and other experience that a seasoned executive will learn in a telco business organization.

Tags: clec, master agency, mergers, reseller
Related tags: master agencies, global network, derby agency, deliver solutions, network, interesting