Hexatronic enters U.S. data center market via Data Center Systems acquisition
Hexatronic Group AB says it will continue its streak of acquisitions with an agreement to buy Data Center Systems (DCS) in a deal with a total enterprise value of between $17.2 million and $19.9 million. Assuming the deal closes, a milestone Hexatronic expects to reach early next month, Hexatronic will gain a foothold in the U.S. data center cabling market.
Texas-based DCS provides fiber connectivity system “solutions” for the data center market, including telecom, financial, and technology companies. Offerings include infrastructure design services, installation, and managed services. Current owner Kevin Ehringer will remain as CEO post close.
The purchase is formatted as a joint election by the two companies under Section 338(h)(10) of the Internal Revenue Code; this move permits the deal to be treated as an asset purchase for tax purposes. The effective enterprise value, which includes a tax benefit of $2.5 million, represents an implied EBITDA transaction multiple of 5.7X to 6.6X. A senior bank loan from Danske Bank will fund the transaction.
“With DCS, Hexatronic enters the US market for data centers that is expected to experience continued growth. Ever increasing data traffic as well as the trend towards edge computing increase the need for both larger hyperscale data centers as well as small and mid-sized data centers closer to the edge,” commented Henrik Larsson Lyon, CEO of Hexatronic Group.
“The U.S. is today Hexatronic’s largest market, and one of three strategic growth markets,” Lyon continued. “With the acquisition of DCS we are now able to provide customers with locally assembled and terminated products for Hexatronic’s complete FTTH solution, which will shorten turnaround times and increase flexibility, and on top of that offer DCS’s expertise in assembly design and advisory service. DCS’s production in the U.S. will complement our current connectivity productions in Sweden, Estonia, and the UK.”
Hexatronic has announced a string of acquisition agreements over the last year or so, primarily in Europe (see, for example, "Hexatronic acquires H. Weterings Galgeweg for ducts and tubes"). In the U.S., it purchased training and education provider The Light Brigade from AFL last year (see "Hexatronic to acquire fiber-optic training company The Light Brigade").
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Stephen Hardy | Editorial Director and Associate Publisher, Lightwave
Stephen Hardy is editorial director and associate publisher of Lightwave and Broadband Technology Report, part of the Lighting & Technology Group at Endeavor Business Media. Stephen is responsible for establishing and executing editorial strategy across the both brands’ websites, email newsletters, events, and other information products. He has covered the fiber-optics space for more than 20 years, and communications and technology for more than 35 years. During his tenure, Lightwave has received awards from Folio: and the American Society of Business Press Editors (ASBPE) for editorial excellence. Prior to joining Lightwave in 1997, Stephen worked for Telecommunications magazine and the Journal of Electronic Defense.
Stephen has moderated panels at numerous events, including the Optica Executive Forum, ECOC, and SCTE Cable-Tec Expo. He also is program director for the Lightwave Innovation Reviews and the Diamond Technology Reviews.
He has written numerous articles in all aspects of optical communications and fiber-optic networks, including fiber to the home (FTTH), PON, optical components, DWDM, fiber cables, packet optical transport, optical transceivers, lasers, fiber optic testing, and more.
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