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Red-flag review of fibre cable microduct manufacturer

The problem

A private equity firm was considering whether to acquire a Western European manufacturer of microducts for fibre-optic cable deployment, and engaged Analysys Mason to carry out a red-flag review of the target.

Our client wished to understand likely future demand for microducts in key European markets and gain insight into major market trends, drawing on Analysys Mason's significant track record of advising operators and investors in fixed broadband markets

The solution

  • We interviewed members of the target's management team and visited its production facilities to better understand key strategic and operational issues
  • The project included a full assessment of the FTTx market in the key geographies of interest, analysis of the use cases for microducts and the positioning of the target vis-à-vis the demand, as well as a review of the competitive landscape
    • expert interviews were carried out to validate the findings
  • Our team conducted a market-sizing exercise and developed five-year forecasts of the demand for microducts in each target market
  • We used this forecast to comment on the reasonableness of the business plan's projections and to develop alternative scenarios that our client could use to support the valuation exercise and its bid for the target 

Figure: Schematic of a trench with microducts

Schematic of a trench with microducts

The result

Our unique understanding of the FTTx market and the technicalities of fibre deployment (including how microducts are used) gave the client greater insight into the market and highlighted the key risks and opportunities associated with the potential investment.

The client decided to place a bid based on Analysys Mason's alternative scenarios, although ultimately the deal was not completed.

 

Our unique understanding of the FTTx market and the technicalities of fibre deployment gave the client greater insight into the market and highlighted the key investment risks and opportunities.