Headline : M2 Telecommunications pursuing strategic acquisitions...

Headline : M2 Telecommunications pursuing strategic acquisitions in
Australia; will look to acquire in New Zealand in 2008 =20
Proprietary
Intelligence=09
Main body : M2 Telecommunications, a listed Australian full-service
telecommunications company, is pursuing strategic acquisitions that are
complementary to its core business.=20
Chief executive Vaughan Bowen said the "third-tier" telco is looking for
acquisitions to "bulk up" both arms of its business, namely wholesale
and retail in the small-to-medium business (SMB) space.=20
Bowen said these are a mix of both private and smaller listed Australian
telcos. He said M2 Telecommunications is well advanced in talks with
both types of businesses. He said he is interested in telcos with good
reseller models, an existing customer base and a sales and marketing
network into the SMB space=20
Down the track, he said, it could well be interesting to have
discussions with listed Australian telecommunications company Orion
Telecommunications. He said Orion mostly operates in the residential
space but is moving into the SMB space. He said it would be interesting
to understand more about Orion's direction.=20
In an earlier interview with mergermarket, Orion Telecommunications
executive chairman Amanda Lacaze said Orion will consider buying smaller
companies or merging with companies "that look similar [to Orion]". She
said there has been much speculation on which "third-tier companies"
could "go together".=20
Bowen said, first and foremost, potential acquisitions have to be
earnings positive and profitable as they stand. "We are not 'blue sky'
acquirers," he said.=20
He said M2 Telecommunications also does not just want databases, but
companies that can operate as a going concern and service parts of the
market that M2 Telecommunications is not good at. Bowen explained that
an area of weakness for M2 Telecommunications is data services, which a
lot of companies have been doing for longer than M2 Telecommunications
and so are better at it. He said another area of weaknesses is certain
technical skills.=20
Bowen said people are critical in any potential acquisition. He
explained that M2 Telecommunications looks at an acquisition as a going
concern and not just an acquisition of customers.=20
He said cash flow is also critical and he is therefore not interested in
companies that are capital intensive and so tends to avoid telcos that
focus on network infrastructure.=20
Bowen said M2 Telecommunications has three finance vehicles. It has
access to an AUD 15m (USD 12.2m) to AUD 20m (USD 16.3m) debt facility,
has AUD 5m (USD 4m) in cash and a scrip funding facility.=20
Bowen said he expects to complete a couple of Australian acquisitions in
the next few months and then will look to expand the company's presence
in New Zealand. He said he has looked at a couple of companies in New
Zealand, but expects to kick off organic growth at the end of 2007 and
then look at potential acquisitions in 2008. With around NZD 40m (USD
29.3m) in revenue, New Zealand full-service telco Callplus, for example,
is a good company, he said.=20
Bowen said advisors that have brought opportunities to M2
Telecommunications "are circling". He said he would consider hiring an
external M&A advisor on an ongoing basis if it could bring "real value".
He added, however, that he remains sceptical and tends to know who the
acquisition targets are, even the ones that are "below the radar".=20
M2 Telecommunications' market capitalisation is AUD 40m (USD 32.7m) and
it has revenues of AUD 45m (USD 36.8m).=20