13 July 2017
| Alan Burkitt-Gray
With Hibernia now fully integrated into GTT, CEO Rick Calder has added two more acquisitions, ahead of schedule. Alan Burkitt-Gray asks him about his growth strategy
The company has already integrated Hibernia Networks, just
months after the deal was complete, and in mid-June it lined up
two more acquisitions, Perseus for $39.5 million and then, the
following week, Global Capacity for $100 million in cash and
$61 million in shares.
Once integrated into the company, they will join Hibernia
and three acquisitions that GTT made in 2016: One Source
Networks and MegaPath, plus the customer base of
Acquisition and integration "is what we’re good
at", says CEO Rick Calder, who has kept GTT on an annual growth
rate of 40% or more for years.
The latest two acquisitions will nudge the company over his
target of $1 billion in revenue and $250 million in EBITDA.
Annual revenue in 2013 was just over $157 million.
Ease of integration is important in any proposed deal. Take
Hibernia, for instance: the deal was complete in January and by
April the systems were integrated. "I feel very good about the
integration," he says. GTT was sending out the first bills to
former Hibernia customers from its own systems by
That is an important factor in what Calder is looking for.
"You have to be able to eliminate systems," says Calder. "If
you don’t do it quickly you’ll have
them for ever. You have to stop."
Why is it important to close down acquired systems? "One of
the biggest risks is legacy systems, because security risks
increase dramatically," he says. The new owner’s
staff don’t have the same knowledge of the old
systems, so risks can multiply.
"We don’t know them, so we want to eliminate
them," he says.
His target is "integration in one to two quarters", so that
the resulting cost synergies can be achieved quickly.
He favours companies that are based in Europe or North
America, "because that’s where the depth of our
network is". GTT wants "select long-haul routes" rather that
metro fibre. "We continue to look at networks that are
synergistic with our network," he adds.
Strive to say yes
If ease of integration is high on his list of requirements,
what else is there?
"Culture is critical," says Calder. Are the employees of the
prospective acquisition easy to do business with? "Are they
fast and responsive? Do they strive to say yes? We ask: is this
going to be a good cultural fit?" he says. "We try to buy
businesses that are culturally similar to us."
Each of Hibernia’s staff were interviewed by
three separate GTT people, who then compared notes. Calder
himself spoke to 130 of them one-on-one, he says. "We try to
take the best of them."
How important is size in any proposed acquisition?
"Historically we’ve never bought a business
that’s more than half of our size, to mitigate the
financial risk," he says. "Of course, the numbers have become
bigger over time."
So, you think you have a company that seems it would be a
good fit for GTT. It’s in the right place, in the
right market. It has a good set of customers, and you think you
and your employees have a similar culture to GTT. What do you
It's important to note that you don’t pick up
the phone to Calder, or to the company founder and executive
chairman Brian Thompson.
"We like to focus on firms that have a broker," says Calder:
he sees that as a good test that the company is already wanting
to be bought.
"In fact, if we get an unsolicited approach, we ask the
company who they have hired as a broker," he says. "If we have
to approach firms directly, we don’t like
Deep funnel of opportunities
So, the answer seems to be: get yourself a broker and ensure
the broker contacts GTT. "But we have a deep funnel of
integration opportunities – one of the largest
it’s ever been," says Calder.
It’s possible to speculate that this means GTT
is becoming even more acquisitive. Back in mid-May, at
International Telecoms Week in Chicago, Calder hinted that
GTT’s next acquisition would be "in the second
half of 2017 or in 2018". Weeks later, before the end of June,
and he’s announced not one but two.
Where next? Latin America, maybe? "We continue to look," he
GTT does business "very differently" from other carriers,
with its "speed and agility", says Calder. That’s
what he’s demonstrating in its M&A policy as
well as its business strategy.