Broadband Communities

JAN-FEB 2012

BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.

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Provider Perspective What's in Your Grocery Cart? The PCO market is filled with tempting acquisitions right now – but buyers should beware. By Bryan Rader ■ Bandwidth Consulting LLC E very so often, the private cable operator (PCO) industry enters a period in which numerous companies are on the market. Tis can happen for many reasons. Older com- panies may be looking to exit, other companies may be having difficulty raising enough funds to continue to grow, or provid- ers may be seeking to sell noncore systems. Tis is happening today. Across the United States, PCOs are beginning to sell a few systems, parts of their businesses or entire companies. A broker recently told me, "I don't ever remember so many cable systems on the market at one time. It's a great time to be a buyer. Tere is so much to choose from." For an industry to go through periods of consolidation, dis- positions or noncore sales is not uncommon. Companies such as GE have made a living buying and selling businesses to grow a market or get out of a sector. I believe this can be a good thing for a mature industry. Some service providers on the block have been in business for more than a decade. Others grew into markets that don't fit their needs anymore. Some can't afford to upgrade their port- folios to current technologies. None of this means the industry isn't ripe with opportunity. It certainly is! As some older companies exit, dozens of newer, entrepre- neurial companies are just getting started. Tey may have dif- ferent business plans, technologies, geographic footprints or market segments, but they're still in the same business. BARGAIN HUNTING Te systems, portfolios and businesses on the market today present great opportunities for newer companies to bulk up. However, the new guys must be careful when they examine potential deals. In the early 2000s, many PCOs that had grown aggres- sively during the period that led up to the dot-com era were overstretched and underfunded. Tey needed to get out, and they were selling every system. Tis created great opportunities for newer operators looking to grow. My company was one of those newer operators. We looked at potential acquisitions as a great way to gain scale, but we also saw that some deals could bring us down if we were not care- ful. Ultimately, we ended up doing a handful of smaller deals, all in core markets, that added to our total revenue and overall efficiencies. We passed on many other deals. If you're shopping at Costco, you may be tempted to throw every bargain into your grocery basket. Tirty-six rolls of toi- APRIL 24 – 26 • INTERCONTINENTAL HOTEL – DALLAS Bryan Rader will speak about broadband for senior housing at the 2012 Broadband Communities Summit, April 24–26. let paper? Fifty cartons of eggs? Eighteen cases of Diet Coke? Sure, those will go well with these 500 snack bags of Cheez-Its. When you get home, you may wonder whether all those bar- gains were necessary. If you don't need it, it's not a bargain. Look at these PCO sellers closely and consider their mar- kets, their potential and their current product mixes. A sys- tem won't run the same way it did under someone else's watch. Tink about how it will fit into your grocery cart – I mean property portfolio. Ask yourself: Does it fit my operating plan? Did I plan to be in these markets? Do I know these markets? Do they fit the culture of my company? Is this an area in which I can grow? Once I complete the acquisition, can I add new MDU com- munities in this market? Do I have clients, contacts or relation- ships in this market? Do I have trustworthy staff to manage the market? Are my products a good fit for this acquisition? Does it play to my strengths? If your focus is generally on digital bulk communities and you are considering a deal that focuses on wireless broadband, tread carefully. For some companies, "shopping" isn't even the best approach. Te organic section of the grocery store includes organic growth – in other words, finding, closing and building cable systems rather than acquiring them. Happy New Year and best wishes for a very successful 2012. I hope your grocery cart will be filled with much success. Y About the Author Bryan Rader is CEO of Bandwidth Consulting LLC, which assists providers in the multifamily market. You can reach Bryan at bryanjrader@yahoo.com or at 636-536-0011. Learn more at www.bandwidthconsultingllc.com. 30 | BROADBAND COMMUNITIES | www.broadbandcommunities.com | JANUARY/FEBRUARY 2012

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