Deploying capital from its second global infrastructure fund, a $3.1 billion vehicle closed in 2015, KKR has agreed to acquire a stake of up to 40% in Madrid-based telecommunications infrastructure provider Telxius.
The deal implies an enterprise value of nearly €3.7 billion, or 11.4x EBITDA, with KKR paying up to €1.3 billion for the position. Operating on both sides of the Atlantic Ocean, Telxius owns and operates a portfolio of more than 16,000 telecom towers in five countries and a network of around 40,000 miles of submarine fiber optic cables.
KKR’s investment is a major one in an industry where private equity’s interest may be on the wane. Last year brought the completion of just 234 deals in the global communications & networking sector, a five-year low, according to the PitchBook Platform. And while activity in 1Q does tend to lag behind the rest of the year, at the current rate, PE activity in the sector is currently on the slowest pace of any year in the past decade.
The current low came in 2009, when a mere 191 deals closed, but that figure increased by more than 50% by 2013—an uptick that mirrored that in the private equity industry as a whole, although with much more rapid growth. That acceleration gave way to a plateau in 2014 and 2015, though, before last year’s relatively steep drop-off.
That decline may be due more to a general quieting in PE activity last year, but it could also be the early stages of a more industry-specific change in the attitudes of investors.
That KKR continues to pursue big-time deals in the space is no surprise. The firm is among the very busiest in communications and networking, as you can see in this list of the top PE investors in the sector since the start of 2008, ranked by deal count (including add-ons):
PitchBook Platform users can check out the full list of investors (plus plenty more info) right here.
Article by Kevin Dowd, PitchBook