Zayo: CLEC woes mean buyer’s market for fiber

“The window could close at any time,” Caruso said. “We thought it would have been closed by now frankly. But between [CLECs stumbling] and the debt markets, it’s kind of chilled everyone to the point where it just keeps lasting another quarter and another quarter. But that’s going to change.”

“Level 3’s trying to position itself to be more on the proactive side of acquisitions,” Caruso said. “There are rumors they might be readying themselves for that. TWTelecom’s done a great job in assimilating an acquisition from a year and a half ago, Expedius. My guess is they see themselves as potentially active again at some point in not-too-distant future.”

As for where network asset valuations stand these days, they depend greatly on the specific attributes of each business, Caruso said. “We’ve paid has high as high single-digit multiples of EBITDA, but usually they’re lower than that.”

“If you’ve got good solid underlying fiber, which is key – managed service [businesses] get lower multiples; those might get 5 to 6 times multiples of EBITDA if you don’t have fiber,” Caruso said. “If you have fiber and a healthy business, you could command certainly north of those numbers. If you have a lot of untapped potential, it could be materially more. A lot of deals get done in the 7 to 8 [times EBITDA] vicinity. There are deals that get done higher if it’s an interesting property that’s growing and being managed very well.”

Joking with the audience in attendance, much of which represented companies of the sort Zayo has acquired, Caruso urged anyone considering selling their business to do it now, while the market continues to favor Zayo. “Don’t wait two years,” he said.