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PE Firm Oak Hill Capital Acquires Telco, Fiber Optic Service Provider Otelco

Telecommunication and fiber optic network services provider Otelco is being acquired by private equity firm Oak Hill Capital.

This is M&A deal 306 that ChannelE2E has covered so far in 2020. Also, this is M&A deal 15 in the fiber optic network service provider market that ChannelE2E has covered since 2016.

Otelco has offices in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia. The company offers various telephony and networking services to more than 33,000 customers. In addition, Otelco operates 11 incumbent telephone companies that serve rural markets.

Under the terms of the deal, Oak Hill will pay an equity purchase price of $40.6 million — which is an enterprise value of $105.7 million. As part of the deal, Oak Hill will assume or refinance Otelco’s outstanding debt, the buyer said.

The deal is expected to close in Q4 2020.

Oak Hill Capital Acquires Otelco: Executive Commentary

Richard Clark, president and CEO, Otelco

Explaining the deal in a prepared statement, Otelco President and CEO Richard Clark said:

“Like much of the telecommunications industry, Otelco is rapidly deploying technology, including fiber to the premise, to increase internet speeds for our customers. We have invested in fiber network construction over the last several years in response to the demand for higher bandwidth and have demonstrated our ability to deliver the necessary technology. Oak Hill has invested capital in other telecommunications providers to advance the deployment of the technology needed to support up to one-gigabit internet speeds. Oak Hill’s commitment to facilitate Otelco’s growth will allow the Company to accelerate fiber growth plans that would not have been possible within our existing capital structure.”

Stephen McCall, Chairman of Otelco’s board of directors, added:

“This transaction is a good outcome for Otelco’s shareholders, customers and employees. We believe Oak Hill will provide the resources to speed up our network upgrade plan and wish them and the Company continued success.”

Jennifer Jun, principal at Oak Hill, concluded:

“Otelco has assembled a talented leadership team capable of ramping up their deployment of advanced technology solutions. With our experience and capital, we can support Otelco’s mission to serve more customers with increasing broadband speeds. We look forward to working with Richard and the rest of Otelco’s senior management team in executing on Otelco’s next chapter of growth.”

Oak Hill’s Investment Background

Oak Hill has investment experience in the MSP and telco service provider markets. In 2011, the private equity firm acquired Intermedia, transforming that business from an email and web hosting company into a cloud services provider. When Oak Hill sold Intermedia to Madison Dearborn Partners in 2016, the CSP’s annual revenue was $200 million.

Oak Hill has operated for 34 years and manages funds worth around $15 billion. The firm has invested in more than 90 private equity transactions across a range of market segments, both within the U.S. and globally. Key investment arenas include Media & Communications; Services; Industrials; and Consumer, Retail & Distribution.

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