Telecom Trends Set Stage for a Dynamic 2024
Panther Equity Insights -- a private equity newsletter covering all things IT, Tech, Business Services, eCommerce and Markets.
Happy Wednesday folks! Welcome back to this week's edition of Panther Equity Insights, the bi-weekly newsletter from Panther Equity Group.
This week we’re looking at:
The Evolving Telecom Landscape
Industry Commentary on e-commerce, software M&A, and AI powered KPIs
Private market insights on finding M&A success in a down-market
Our aim is to provide you with the latest insights and advancements in these verticals, along with valuable perspectives. We strive to create a newsletter that is informative and thought-provoking for all market participants.
We’re Looking For Deals 🎯
Our team is focused on making investments within the IT Services, Technology Services, Business Services & eCommerce verticals. Along with our operating partners, we have decades of experience paired with a vast network of experienced executives and LP investors.
Size: EBITDA of $2 million – $12 million
Geography: U.S. or Canada headquarters
Target Transaction: Majority, significant minority, and structured equity investments
Business Profile: Founder or closely-held ownership with an experienced management team
Additionally, Panther is actively looking for ‘add-on’ investments that meet the following criteria:
Industry: IT Digital Transformation / Software Dev 💻
Size: Up to $4 million in EBITDA
Geography: Flexible
Target Transaction: Majority recapitalization
If you’re a Founder / Shareholder interested in working with Panther, or an intermediary with a deal to share — feel free to reach out and get in touch with us! We are happy to compensate fees to intermediaries & referrals at market levels.
Broader Market Chatter
Telecom Trends Set Stage for a Dynamic 2024
In the coming 12-18 months, the telecom industry is expected to face significant transformational pressures influenced by the evolving needs of both enterprises and consumers. While the industry is set to be a key beneficiary of strengthening digitalization tailwinds, it is also becoming an industry where operators must remain agile.
In today’s newsletter, we’ll unpack some of the key trends expected to shape the telecom landscape in 2024 and beyond.
Edge Computing Market to Experience 30%+ Growth through 2030
In 2024, the prominence of edge computing is forecasted to surge due to the immense volume of data exceeding cloud capacities and the escalating demand for localized data processing.
Edge computing involves networks of micro data centers that push data to cloud storage, allowing processing and storing data closer to the source for real-time analysis. It is fundamental to a variety of edge devices, including Internet-of-Things (IoT), mobile POS, and medical sensors.
The latest forecast by Fortune Business Insights projects the edge computing market size to grow exponentially from $15.96 billion in 2023 to $139.58 billion by 2030, representing 30%+ annual growth.
Additionally, there is a noticeable trend among businesses shifting towards hybrid or private networks, reducing their reliance on Wi-Fi to achieve tailored solutions. Similar to how operators have diversified their services to include network slicing and private networks, analysts predict 2024 will mark a significant push for the advancement of edge computing aimed at enhancing services offerings.
One example of a customer related use case involves large venues, such as stadiums and events, where edge computing resources can be used to ensure fast connectivity for attendees. Many other applications of edge computing are still evolving, including those involving AI.
The overall market will experience exponential growth from current data needs alone, and will continue expanding as new applications emerge. Operators in the market should be thinking of strategies to target emerging customer segments to capture and retain market share early.
5G Rollouts & Shared Networks
Last year, investments in 5G did not progress as fast as expected, according to a report by Boldyn Networks. However, there is still a focus on 5G network densification and fiber rollout, especially in the US.
Delays in the rollout of 5G networks are attributed to ongoing changes in hardware vendors. The industry is experiencing consolidation among major network equipment providers, potentially reducing them to only two or three players.
This will facilitate neutral host or shared infrastructure, which will accelerate the 5G rollout bringing new momentum in 2024. The overall telecoms industry is expecting a rise in infrastructure-sharing agreements among operators, aimed at reducing long-term costs and promoting collaboration.
Municipalities and cities are anticipated to lead this trend, partnering with neutral host providers to expand connectivity. This strategic shift towards infrastructure sharing reflects a response to the need for greater efficiency, cost-effectiveness, and evolving customer demands.
Telecom investors should be actively seeking beneficial infrastructure sharing partnerships that allow more competitive pricing. With the market heating up and evolving, cost-savings and operating efficiency will be crucial for retaining market share.
Overall, 2024 is set to be transformative for the telecom industry, with major shifts and trends affecting operators. The edge computing boom and evolving 5G landscape will be at the forefront of the industry’s focus, but other trends such Open Ran and ESG focus are gaining momentum too.
Telecom investors are poised to perform well in the coming year, but they must demonstrate the operational excellence to position their portfolio companies to benefit from these dynamic trends.
About Us
Panther Equity Group is a private equity firm focused on making investments within the IT Services, Technology Services, Business Services & eCommerce verticals.
Our team and Operating Partners have decades of experience within our focus verticals along with a vast network of experienced operators and LP investors.
We have the Operational, Technology, M&A, Business Development, and industry-specific Strategy expertise to help companies accelerate their growth and reach their full potential. Learn more about Panther Equity Group by heading over to our website:
A Trusted Partner For Founders, Companies & Entrepreneurs
Industry Commentary
E-Commerce
📖 How ecommerce will change in 2024
Software M&A
🎤 Thoma Bravo's Behind the Deal
If you’re a company Founder / Shareholder interested in working with Panther, a deal maker interested in connecting or with a deal to share, or an Operating Executive looking for a part-time, full-time, or a Board Level Role — feel free to get in touch with us!
Private Market Movements
Successful Tech M&A Strategies in a Down-Market
The broader M&A market in 2023 encountered challenges due to a significant disparity in valuation between buyers and sellers, coupled with other hurdles such as high interest rates, economic uncertainty, and regulatory risks.
While many anticipate a broad recovery in 2024 with impending rate cuts, investors are likely to face the current market downturn during the first half of the year. Tech investors face even more hurdles due to the significant decline in tech M&A last year, as seen in Bain’s analysis below.
Tech faces a unique situation where it experienced significant M&A declines with deal values plummeting and valuations dropping to half of 2021's peaks, but also double digit revenue growth in many verticals.
This is because tech is experiencing significant revenue tailwinds, but the current M&A environment emphasizes profitability over growth due to new deal economics. For tech private equity investors, shifting priorities to profitability over ambitious growth goals in the near term will be crucial to realizing favorable exit values.
Initiatives could involve reducing costs and improving operating efficiency instead of targeting a lofty customer acquisition strategy. Retaining market share and improving operations will reward tech investors more than growth projections in terms of M&A in today’s environment.
In addition, several segments of M&A are seeing rapid growth, including vertical M&A and cross-border acquisitions. Tech investors can look beyond traditional acquirers or targets to expand their scope and shift their future strategic goals.
Frequent M&A Leads to Long-Term Success
Observing a downturn in the M&A market may tempt both GPs and LPs to adopt a passive strategy until conditions improve. However, Bain's research shows that firms consistently engaging in M&A activities across all market cycles tend to achieve superior performance.
As seen in the chart above, frequent acquirers managed to complete acquisitions during both the COVID-19 pandemic and the current period of elevated interest rates. These active acquirers significantly outperformed passive or inactive companies in terms of long-term total shareholder returns.
Bain's findings indicate that the advantages of regular M&A engagement are increasingly pronounced over time, indicating a fundamental shift in investing. GPs that actively invest across market cycles can leverage tested and customized approaches to reshape their operating businesses and ensure portfolio companies remain adaptable in diverse environments.
Tech PE operators should not hold off on their M&A goals despite last year’s collapse in deal value. In fact, now may be the best time to acquire since a recovery appears to be nearing while valuations haven’t adjusted yet. Successful acquirers will be well positioned for the market recovery while also gaining valuable experience investing in a down-market.
About Panther Equity Group
Panther Equity Group is a private equity sponsor seeking to provide capital, strategic support, and resources to healthy & well-positioned private companies in the lower middle market. We typically focus on companies with $2 million - $12 million in EBITDA and seek to make majority or significant minority equity investments.