M&A Spotlight: Halo - Turbocharging growth through transformational acquisitions

Halo became the global leader in third-party optical transceivers following its creation in 2017 when Inflexion merged UK-based ProLabs with AddOn in California. The four-year partnership saw profits grow nearly 10x and investors in Inflexion funds generate a >6x money multiple when the business was sold to Amphenol in 2021.

Data has been key to success for businesses of all sizes for decades. As part of its ongoing efforts to devise investment theses, Inflexion identified the global transceiver market as an exciting niche: it was expanding rapidly as accelerating demand for voice and data services catalysed the roll-out of faster and higher capacity networks.

Inflexion’s search for a differentiated player in the fibre-optic value chain ultimately led the firm to create a global networks business by combining two highly complementary companies: ProLabs, a small business in the West of England with a strong client base of blue-chip telecoms and financial services businesses in the US and Europe, with AddOn Computer Peripherals, a California-based business whose CEO Matt McCormick recalls the magnitude of the transaction: “The merger was truly transformational. We immediately became the only truly global provider of third-party transceivers in a $6 billion market where businesses typically sell in a single region. Overnight we had facilities across the US and Europe.”

The first year post-acquisition was spent professionalising, integrating and fortifying the new Halo business, including on-boarding some strong distribution partnerships in the two locations to create a strong footing to accelerate future acquisitions. Ensuring the growth could be supported by the newly created Halo Technology Group would require careful work. “We wanted to build the foundations for a global champion, as well as develop the playbook that we could apply and scale in other geographies as the company grew,” recalls Jonathan Ma, Partner at Inflexion. The team spent two years building those foundations to create a robust model and system to roll out whether in the US, UK, Belgium or Brazil. This included building best-in-class processes and systems to support its growth ambitions.

International scale

A growing brand enabled Halo to become the global platform aggregator, and three further acquisitions took place in the space of just seven months in 2021, all sourced, negotiated and executed by Inflexion: Skylane Optics in Belgium and Brazil; Solid Optics in the Netherlands and the US; and Aria Technologies in the US and China to expand Halo’s product offering into optical cabling. Halo had become so cash-generative since inception that these acquisitions – larger in aggregate value than the initial Halo platform had been – were funded without additional equity from Inflexion, thereby allowing management to avoid dilution.

The growth meant Halo had a differentiated value proposition which enabled it to cater to the needs of big telcos as well as smaller customers. “Whether a small customer needing two basic transceivers or larger telecoms clients requiring thousands of advanced devices, Halo was able to meet the demand of a broad spectrum of clients, recalls Halo Chair Al Aguirre. This USP meant Halo was able to consistently and impressively grow its revenue and EBITDA. It invested heavily in overheads and infrastructure to win new clients, ultimately luring big telecoms providers away from big OEMs. “They recognised the value Halo could bring by improving service with better availability and pricing for the customer,” explains Jonathan. This organic growth saw revenue and EBITDA grow 25% and 50% respectively as blue-chips brought their custom to Halo.

This growth was supported by a number of factors, including building out the talent bench. A new CFO and Chief Strategy Officer were appointed in the US early on, and Inflexion’s talent team sourced a Chair, based on the West Coast. Other drivers of value acceleration included international expansion. “We pioneered our office in India because of Inflexion, whose in-country expert’s experience, contacts and in-depth understanding of the region was invaluable,” Matt explains. This added more than $10 million of revenue from one telecom client in India in one year alone, while Inflexion’s in-country expert in China helped Halo to build and develop some strong relationships with core suppliers there.

Halo’s journey with Inflexion was bookended with acquisitions, and at the end of 2021 Amphenol Corporation, one of the world’s largest providers of electrical, electronic and fibre optic connectors and interconnect systems, purchased Halo for $715 million. Ultimately the leadership team saw Halo’s EBITDA grow nearly 10x in four years.

All Inflexion portfolio companies, regardless of size or ownership stake, have full access to our dedicated value acceleration resources covering digital enhancement, international expansion, M&A, ESG, commercial strategy and talent management. Our M&A expertise has supported more than 470 acquisitions for our portfolio companies, including 100+ international acquisitions across 32 countries.