After Hibernia, GTT adds another two acquisitions Alan Burkitt-Gray 13 Jul 2017 Like the idea of being taken over by the industry’s integration king, GTT Communications? 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 Yipes. 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.So what’s he looking for and how does he go about it? “I see a spate of $30-$40 million firms that are finding it hard to grow,” says Calder. Potential acquisitions have to be accretive and have to bring in clients. “Some bring a little infrastructure but generally it’s the customer bases we want. We can collapse the infrastructure into our network.”First bills 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 May. 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 yesIf 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 do next?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 that.”Deep funnel of opportunitiesSo, 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 says. 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.