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April 21, 2014
MW Transaction Analysis  

Birch Communications to Acquire Cbeyond

Financial Overview
  • Transaction Size:                                                   $326.5 million
  • Enterprise Value:                                                   $297.6 million
  • EV/LTM Revenue:                                                                   0.6x 
  • EV/LTM EBITDA:                                                                     4.2x

Transaction Facts  

  • Birch Communications, Inc., a business communications firm, announced that it had entered into a definitive agreement to acquire Cbeyond, Inc. (Nasdaq:CBEY), a cloud services provider, for a cash transaction of approximately $330 million.
  • The deal, at $9.97 per share, represents a 56.8% premium over Cbeyond's stock price on Nov. 5, 2013, the trading day before Cbeyond announced its process to explore strategic alternatives. It is a 40.8% premium over the closing price of Cbeyond on April 17, 2014.
  • The combined company will have approximately 200,000 customers and is expected to generate $700 million in revenue.

Expanding Reach in SMB Space With Full-Lifecycle Services

  • Cloud Capabilities Attractive to All Markets: The deal is the latest example of the telecommunications industry turning to cloud providers in an effort to boost multiples and broaden capabilities. Recent high-profile such deals include Rogers Communications' October acquisition of Pivot Data Centres, Time Warner Cable's 2011 acquisition of Navisite and Verizon's 2011 acquisition of Terremark.
  • Buying an Entry into the SMB Space: Currently, the Small and Medium Business market is a highly fragmented market. By pairing Cbeyond's services offerings with Birch's existing telecommunications accounts, the combined company will present an attractive end-to-end services suite covering every stage of the business lifestyle.
  • Using Resources and Experience to Execute Vision: Cbeyond successfully put in place much of the infrastructure necessary to provide enterprise-class cloud and connectivity resources to the lower SMB market niche - but it did not have the resources to completely execute on this strategy. Together with Birch's experience controlling costs and scaling its own business, this foundation will enable the combined company to successfully make Cbeyond's original vision a reality.

For more information, read the press release here.

 

 martinwolf was not the advisor in this transaction. 


About martinwolf    

 

                
             San Francisco, CA                                                Bangalore, India

With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in nine countries. We are a five-year member of the Merrill Lynch PS Referral Network, and are a strategic partner of the Enterprise Advisory department of CICC, China's first joint-venture investment bank.

 

The firm is also a presenting sponsor of the Global IT M&A Forum.   

 

martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.  

 

To learn more about martinwolf, contact Matthew Putzulu at mputzulu@martinwolf.com.

 

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