Startec Global Communications

Industry: Telecommunications
Initial Ownership: 68.5%
Date of Initial Equity Investment: May 2004
Date of Exit: July 2007

Business Description: Startec Global Communications, Inc. (“Startec” or the “Company”) owns and leases a telecommunications network throughout the U.S. and in several emerging market economies, including India, Russia, Poland, Ecuador and Israel. Startec provides voice, data and internet services to consumers primarily residing in major U.S. ethnic communities who frequently use telecommunications services to contact emerging market destinations. Startec also markets its wholesale network capacity to international long-distance carriers. 
Investment Thesis: In bankruptcy at the time, Startec was a compelling central equity investment. Key attributes included:

  • Attractive purchase price (net liquid asset value)
  • Immediate, accretive add-on acquisitions available, absorbing existing fixed-cost structure
  • Seasoned operating platform with strong back-office infrastructure
  • Stable customer base
  • High free cash flow

 

Investment Highlights: The deal team stabilized the business and helped drive growth in Startec by providing capital, strategic guidance and financial expertise. Following Startec’s emergence from bankruptcy, the deal team helped the Company complete two add-on acquisitions: (i) invested $1.8 million to purchase certain assets of Telegent Communications, adding an incremental $1.5 million of EBITDA; and (ii) $7.9 million to purchase PT-1 Communications, adding an incremental $5.1 million of EBITDA. Further, after recruiting a new CEO and CFO, the deal team worked with management to develop a strategic plan that converted existing customers into the Company’s higher margin Dial-1 business and cell phone products. In July 2007, Platinum Equity purchased the Company.

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