NEW YORK (
The Carlyle Group's
two recent mergers in the telecommunications space have analysts speculating that the activity is likely to spark more private equity plays in the sector.
"There has been a lull of activity in the space for some time -- it raises the possibility of more transactions occurring," said analyst William Power of Robert W. Baird & Co.
A banker said that there hasn't been a lot of activity in the telecommunications space because the transactions haven't been leveragable. The banker added that Carlyle's transaction was likely to prompt others in the space.
Carlyle announced on Tuesday that it was acquiring
for $31.50 a share in cash or $3.9 billion. Wednesday the firm announced it was acquiring
( SVR) for $31 per share in cash, or $2.6 billion.
The transactions were surprising but not completely unexpected, said Power. "They are both names we have been recommending. They both have good management teams and good cash flow," he added.
Both CommScope and Syniverse are derivative beneficiaries of the smartphone boom. Syniverse provides mobile roaming, messaging and network solutions and CommScope manufactures cables that underpin high-speed data 3G and 4G networks. Carlyle must believe there is high growth in the sector -- it is paying about nine times EBITDA for each company.
Power believes there are a number of companies that other private equity players could be interested in, including
Carlyle's recent interest in pursuing acquisitions is not unexpected as there is a significant private equity overhang in cash that has been raised by private equity funds. Over the last few years, private equity has raised almost $485 billion that has been so far been uninvested, said Randy Schwimmer, senior managing director of Churchill Financial.
"Now that the economy is opening up and credit markets are stabilizing, they are looking to invest that cash," said Schwimmer.
Carlyle declined to comment on either deal.
--Written by Maria Woehr in New York.
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