Fibertech acquired for $1.9B

Kerry Feltner//May 1, 2015//

Listen to this article

Fibertech Networks LLC has been run by its co-founders for nearly 15 years. The next leaders for the company will include a pair of telecommunications veterans with experience here as well.

Fibertech Networks’ John Purcell and Frank Chiaino plan to step down as executives upon completion of the firm’s merger with Boxborough, Mass.-based Lightower Fiber Networks in $1.9 billion all-cash deal.

Lightower CEO Robert Shanahan, whose roots in telecom go back to ACC Long Distance Corp. in the mid-1980s and Frontier Communications in the early 1990s, is to take the helm of the combined firms once the deal is approved. Longtime Fibertech Networks executive Michael Hurley is expected to take leadership of the Rochester operation.

One of Rochester area’s fastest-growing firms, Fibertech Networks this week entered into a definitive agreement to merge with Lightower Fiber Networks. The deal will be funded by a combination of equity and debt, officials said.

Fibertech Networks is a provider of fiber-optic based network services headquartered in Brighton. All 340 of its employees will be retained through the deal, officials said. Lightower Fiber Networks provides high-capacity network services. It employs 510 people.

The firms have been talking seriously about the deal for the past 60 days, but the companies have known each other for the past five years.

“It’s something we’ve always wanted to do, and it has been on our number one list of things to accomplish,” Shanahan said. “We’re looking at Fibertech as a growth engine for the combined company, which means that the employee base there in Rochester will need to support our growth. We’ll be looking to expand the presence there given the importance of Rochester and Fibertech and the overall operation.”

Fibertech Networks has hired roughly 20 people in the first quarter this year and expects to add at least 20 more staffers by the end of the year, officials said.

For some past telecom companies, a merger meant moving from the area or slashing employment totals. This is not the case for Fibertech Networks, said Hurley, senior vice president of sales and marketing at the local company.

“Our (area’s) track record in telecom hasn’t been all that stellar when it comes to these things,” Hurley said. “Typically when there’s an acquisition the larger company tends to have people’s synergies as part of the equation, so they need to cut workforce by some level.

“(This merger is) about the employee base, our investors getting a return and the community. I’m just happy that they (Lightower) saw enough value in us as a team to want to continue to grow it … it’s tough in a market like Rochester when we see companies get bought by bigger companies from larger markets and get shrunk down here.”

The existing financial backers of Lightower Fiber Networks include Berkshire Partners, Pamlico Capital and ABRY Partners. Each company will provide additional equity to support the transaction. Current Fibertech Networks investors include Court Square Capital Partners.

New local leader
Hurley, a 15-year veteran of the firm, is to head the Rochester branch of the combined companies—which will get a new name—after the deal closes.

“I’m very excited about the combination with Lightower,” said Hurley, who began his career at Rochester Telephone Corp. and then worked at Frontier Communications. “When you put these two companies together we’re going to be able to provide more services to more customers in more places. The employee base here is going to be expected to do what we do and continue to grow the business, and that’s exciting for us going forward.”

“On a personal level, it’s an honor to be able to be at the lead of that, but it’s not about me. It’s about employees we have here,” Hurley said. “You want to see those people continue to thrive. It’s been a blast the last 15 years.”

Purcell said Fibertech Network officials are pleased with the decision to have Hurley run the operations here.

“We’re delighted that he’s the one because he’s done a terrific job,” Purcell said.

Purcell said the deal is good for the Rochester area.

“I think it’s a big win for Rochester that a startup company sells the stock but instead of having the company disappear it is going to retain the employees,” Purcell said. “There will be some functions of Lightower that will be transferred to Rochester, so how big we grow is all dependent on our success in these markets. For sure it is a different kind of outcome than so many of the different mergers and acquisitions.”

Rochester still will be a vital market for the combined companies, officials said.

“Rochester will be a very important part of this company’s infrastructure,” Purcell said. “We will manage everything towards the west, as we head to the cities out there we’ll continue to serve in Rochester.”

Shanahan is a native of East Aurora, Erie County, and understands the Rochester region. The way Fibertech Networks was operating stood out to Shanahan long before the current deal, he said.

Indeed, one of Fibertech’s early deals, back in 2002, was a 20-year network agreement to provide fiber-optic net-works to a Massachusetts-based telecommunications firm, Conversent Communications LLC, headed by Shanahan.

“They’re a great company. They’re the model of how to build and operate a company in this business,” he said. “They’ve been doing it for about 15 years now. They’ve had consistent steady growth year-over-year (and it is) all organic; they haven’t done any acquisitions. From nothing to what they’ve created year-after-year has just been incredibly impressive.

“They do a lot of things really well that we’ll adopt across the entire company. They know how to build networks, they know how to expand, they’ve got great customer relationships, and these things are important to (implement) across a bigger platform,” he added.

Veteran of deals
Shanahan said his company has been through mergers and acquisitions before and has a specific process in place for the transition.

“We’ll become a bigger company with more territory and network assets and employees and customers. There’s certainly challenges any time you’re integrating companies like this. But this will probably be the seventh or eighth company that we have either merged or acquired so we’ve got a playbook that we use to integrate,” he said.

Last year Fibertech Networks ranked No. 22 on the 2014 Rochester Top 100 list of fastest growing privately held companies.

The merger, subject to regulatory approvals, is expected to close in the third quarter.

Under the deal the combined companies will operate a fiber-based network that spans 30,000 route miles across the Northeast, Mid-Atlantic and Midwest.

Customers will have access to roughly 5,000 wireless towers and almost 13,000 on-net service locations, including commercial buildings, data centers, financial exchanges, content hubs and other critical communications facilities, officials said.

CEO Purcell and Chief Operating Officer Frank Chiaino co-founded Fibertech Networks in 2000. Both will step down from day-to-day management and stay with the firm as senior advisers and board members. They started the company 15 years ago with eight employees.

“I knew exactly going in that this is the situation, (and) age is a factor and Rob is a very capable person,” Purcell said. “Frank and I are both willing to stay with the company but also invest in the combined company.”

“It’s a tough moment for both Frank and I, but it’s a great moment,” Purcell said. “I’ve told the employees (Monday morning) I’m very proud of the situation, the highlight of my business career, but it’s going to be hard to not be there day-to-day. Nothing and nobody lasts forever.”