Live Deals: Syndicate Creates Telecom Platform –

In an attempt to get in while the gettin’s good, Banc One Equity Capital, Saunders Karp & Megrue, Carlisle Enterprises and Gateway Partners have committed more than $125 million to set up a telecommunications infrastructure platform company.

Banc One and Saunders Karp are the lead sponsors and together hold a controlling interest in the new company, Linc.net, which represents the first telecommunications venture for both firms. Gateway Partners and Carlisle Enterprises are minority investors and will lend strategic value to the upstart company.

John Megrue of Saunders Karp said the firms’ pooling of $125 million in equity should be substantial for near term investments and will be used to make acquisitions worth $300 million to $500 million. Megrue said the group would add capital to Linc.net as it grows.

The investor group has already closed on its first three acquisitions for Linc.net: CLS Group, a project management and right-of-way acquisition specialist based in Edmond, Okla.; M&P Utilities; a regional provider of telecom installation and construction services based in Hamel, Minn.; and C&B Associates, which specializes in telecom installation in rocky terrains.

The combined 2000 revenue of the three companies is about $100 million. The group declined to comment further on details of the acquisitions.

The investment group plans to grow Linc.net into a full-service provider of telecom infrastructure services, by acquiring design, engineering, right-of-way acquisition, project management, equipment installation and aerial and underground construction services.

Megrue said the firms will grow Linc.net organically as well as through strategic acquisitions that add new customers, geographic markets or specialized skills to the company’s offerings.

Telecom Vet Will Lead Them

Linc.net will be headed by Ismael Perera, formerly operations vice president at MasTec Inc., a publicly traded company that specializes in communications and utility construction. Perera has worked in telecom for 30 years, spending 23 of them with BellSouth. While at MasTec, he helped grow the company from $125 million in revenue in 1993 to over $1 billion in 1998.

“We had the opportunity to team with Issy Perera, who is a visionary in this sector and would be successful in a new endeavor,” said Banc One principal Paul Whiting.

Both Megrue and Whiting said the firms formed Linc.net as part of overall strategies to invest in telecom.

Perera said telecom infrastructure is an attractive area in which to apply a buy-and-build model, since it is very fragmented. “There have always been very small companies in the $10 million to $15 million revenues range-hundreds of them,” Perera said. “We want to group the premier smaller companies into one venture.”

There are a number of ventures backed by private equity firms, including Willis Stein’s Orius deal (see p. 16) and competition for the better quality infrastructure companies will be fierce. Perera said one way Linc.net will differentiate itself from the pack is that management of acquired companies will remain sizable investors, holding a 20% to 30% stake in the combined company.

“This is really critical,” Perera said. “They buy into our strategy and put their money where their mouth is. We want these people to play an integral role in the company and contribute towards strategy.”

The group said it expects Linc.net to be a significant player in the industry in two to four years.