$8.1B deal sends cable M&A dollar volume to 5-year high in 2020

Cable M&A in 2020 logged its highest dollar volume since the 2015 transaction bonanza that reshaped the sector, but the industry's M&A activity remained relatively subdued, with only 12 announced deals.

We estimate these transactions fetched a combined $9.59 billion, up 455% annually from $1.73 billion in 2019. The proposed $8.10-billion acquisition of Astound Broadband LLC by a private equity group accounted for 84.5% of the total dollar volume.

Altice USA Inc.'s unsuccessful unsolicited $7.80-billion and $8.40-billion offers for Canadian MSO Cogeco Communications Inc., owner of U.S.-based Atlantic Broadband LLC, could have inflated the metric markedly.

Altice's pursuit of Cogeco puts the number three U.S. MSO's appetite for a sizable deal in perspective, portending a relatively high probability it will be on the lookout for other targets in 2021.

The estimated 2020 annual weighted average forward cash flow continued to hover around its highest level since 2005, coming in at 10.6x for a second straight year. This likely reflects the premium placed on highly profitable cable broadband networks.

The inventoried 2020 deals involved an estimated 3.7 million serviceable homes and businesses, valuing each targeted passing at an average of $2,604.

This is up 18% year over year, but essentially in line with the average dollar figure per passing recorded in 2015, when Charter Communications Inc. acquired Time Warner Cable Inc. for $77 billion and Altice Europe laid out the groundwork to form Altice USA with its acquisitions of Suddenlink and CableVision Inc.

The broadband take rate across the 2020 cable M&A footprints averaged an estimated 36.2%. This is significantly lower than the national cable average, with the metric standing at 51.2% as of Dec. 31, 2020. The differential underscores the growth and profitability opportunities — cable broadband margins hover around 60% — presented by the footprints acquired in 2020.