by Maureen Flanagan
Clear Communications Group, Inc. a leading engineering and construction services provider to the telecommunications industry, is pursuing an ambitious acquisition strategy. Since late 1997, Clear has acquired four communications companies to expand its geographic presence, add new capabilities to its business, and open up opportunities in the dynamic, fast-changing $10 billion telecommunications industry. Headquartered in Atlanta, Georgia, Clear Group is poised to acquire two additional companies, thereby becoming one of the nation's largest telecommunications service contractors and the largest independent wireless engineering and construction services company in the United States. Major customers of Clear Group include AT&T, Sprint, Bell Atlantic, Nortel, GTE, Motorola, Nextel, Adelphia Business Solutions, Crown and Carolina PCS.
In addition to wireless site engineering and construction, Clear Group also provides construction services to wireline, fiber optic and cable networks. It also provides equipment installation, optimization and maintenance services to the wireline and wireless industries. In November 1999, American Capital Strategies, Ltd. (NASDAQ Symbol: ACAS), provided Clear Group with $13 million of senior subordinated debt to finance the acquisition of TWR Telecom (TWR) and McKenzie Telecommunications Group (MTG), plus a $4.5 million senior subordinated acquisition facility to support further acquisitions.
"With this financing, Clear Group enlarges its geographic reach and scope of services by adding two additional companies to the group. These companies provide Clear with additional resources, highly skilled personnel and more capabilities that will diversify and enhance our operations," said Clear Group Chairman and CEO Stephen F. Johnston, Sr.
Clear Group has been on the cutting edge of the rapidly changing telecommunications market. With an established reputation for quality and customer service, Clear has a track record of managing large scale projects on a tight timetable and offers a full complement of services under one roof - RF engineering, site acquisition, design and engineering, construction management, and construction. Clear's full-service capability is a key factor in an industry where customers are increasingly more interested in one-stop shopping and accountability than they are in negotiating with a maze of sub-contractors.
Clear Group developed its broad line of capabilities through a series of strategic acquisitions. In 1997, the company acquired Minerich Telecommunications, Inc., a leading company in the engineering and construction of microwave and wireless facilities. That same year, Clear Group also purchased Integrated Site Development Corp, LLC, adding an expertise in RF engineering and site design to the company's capabilities. In June 1998, Clear purchased Communications Development Systems, Inc., a leading site developer in the New York metropolitan area specializing in rooftop and water tower installations. And in January 1999, Clear Group folded in Cellular Technologies International, a provider of equipment installation, optimization and maintenance services.
Clear's most recent acquisitions further expand the company's telecommunications reach and capabilities. Based in Houston, Texas, TWR provides the company with an added presence in the growing Southwest region, adding construction crews, skilled engineering and equipment optimization and maintenance services. Over the past 20 years, TWR has built more than 10,000 telecommunications sites, specializing in taller towers. The company, through its TWR Lighting division, also manufactures specialized lighting and hazard lighting to warn aircraft from wireless towers and other tall structures.
The other acquisition, McKenzie Telecommunications Group (MTG), is a wireless site acquisition and zoning company based in Scottsdale, Arizona. MTG specializes in the pre-development phase of site construction, interfacing with landowners as potential sellers or lessors of real estate sites, then obtains zoning approval for the construction of a wireless tower or the placement of antennae on an existing structure. By becoming part of Clear Group, MTG's expertise and established customer relationships can be expanded to manage build-out programs around the country.
To complete these acquisitions, Clear Group's management team searched for a lender that could provide flexible acquisition financing and decided that American Capital was an ideal partner. With capital resources exceeding $360 million, American Capital is a one-stop financing source for middle market companies in need of capital for acquisitions, growth, management and employee buyouts, liquidity and restructuring. American Capital has a history of supporting middle market companies in their acquisition strategies, having made loans for acquisitions to Parts Plus, a rapidly growing East Coast auto parts distributor; Cycle Gear, an ESOP company that has grown into the largest multi-store retailer of motorcycle parts in the country; and Auxi-Health, Inc., a rollup of home health care providers in the Midwest and South. American Capital also supports the on-going financial requirements of its portfolio companies through long-term financial partnerships.
In the Clear transaction, American Capital initially invested $13 million in a subordinated debt facility to partially fund the stock purchase of TWR and the asset purchase of MTG. American Capital has also made available a $4.5 million shelf facility to fund the company's future acquisitions. Stratford Capital Partners, LP joined Demuth, Folger & Wetherill as institutional equity investors and Wachovia Bank led the syndicate for the senior loan.
"Clear Communications Group represents an excellent opportunity for American Capital to participate in the build-out of the domestic telecommunications infrastructure," said American Capital Principal Darin Winn. "The company has an exceptionally strong, forward-looking management team with excellent relationships within the industry. They have embarked on a successful acquisition strategy to position the company at the forefront of the development of the telecommunications industry."
The Telecommunications Act of 1996, which gave rise to a proliferation of spectrum license holders -- licensing as many as a half dozen wireless carriers in any given market -- has spurred competition in the industry and created more opportunities for infrastructure development. At the same time, telecommunications carriers began selling their towers to independent tower companies who further developed the networks by acquiring more towers and entering into "build to suit" contracts with the growing number of carriers. Despite a construction slowdown in 1998, the dynamics created by these industry changes have benefited Clear, providing the company with new customers and shifting the focus to longer term management contracts.
Clear's growth in the wireless industry is driven by the expanding number of network subscribers and the steady increases in use, measured by minutes of use (MOUs). Analysts expect that the creation of a more convenient and dependable mobile phone network will lead to higher MOUs which will in turn necessitate further expansion of other networks, leading to higher MOUs, etc. The combination of new technologies requiring denser networks and the increases of MOUs will likely continue to drive the growth of wireless sites well into the future. These factors have resulted in a rapid increase for site development - on towers, rooftops, water towers or other structures - and this growth is expected to continue, from 65,000 in 1999 to 100,000 by the year 2000.
Clear also maintains and upgrades existing sites to keep pace with technology and optimize performance. The need for site upgrades is expected to accelerate as new wireless technologies are rolled out.
Clear Group has also developed its business in wireline engineering and construction services. The company benefits from the increased local telephone and long distance services and rise of the Internet which rely on fiber optic cable. This fiber optic cable requires the continuous regeneration of the signal. Part of Clear's business is site development, engineering and equipment installation in the shelters in which the power regeneration units are housed.
The company also expects to benefit from the new wireless technologies which use less powerful signals and require two to four times as many sites as traditional cellular technology. Although these sites are not always located on towers, Clear Group has the capability to install antennae on a wide variety of structures as the industry moves to less traditional wireless sites.
Clear Group has definite advantages in the market because of its size, scope of services, and organization into seven regional offices. Clear Group, with its more than five hundred employees, has engineering and construction expertise and can parlay that work with customers that prefer a single service provider. The fact that Clear Group operates in more regions than any independent telecommunications service provider makes it the first choice for many customers.
"With the continued growth in the telecommunications industry, Clear Group has many opportunities ahead, from the potential to cross-sell services among its divisions to the management of exclusive contracts that will enable further expansion. Our company's services fill a critical niche in the industry, which will enable Clear Group to continue to be a leading presence in the years to come," said Johnston.
