Wireless Telecom Group Announces Acquisition of CommAgility

On Feb 21, 2017

Parsippany-based Wireless Telecom Group, Inc., a leader in advanced wireless communications solutions, announced it has acquired CommAgility, Ltd., a privately-held developer of embedded signal processing and RF modules, LTE PHY/stack software for 4G/5G mobile networks and related applications.

CommAgility, headquartered in Leicestershire, England, provides proprietary solutions enabling the customization of the LTE standard for small cell and private network applications in a variety of rapidly growing commercial and defense markets, including satellite communications, backhaul and research.   Additionally, CommAgility is a critical supplier for leading cellular network validation test systems currently on the market.

“The transaction with CommAgility is directly aligned with our strategy to add transformational growth opportunities to the Company and enhance our scale,” said Tim Whelan, Wireless Telecom’s CEO.  “The combination creates a powerful expansion of the value proposition of our solution set by adding software centric solutions and a combined hardware and software skill set which enhances our product design capability to address large market opportunities.  CommAgility also brings world-class engineering talent focused on LTE wireless communications that will allow us to accelerate our innovation to networking trends driven by 5G deployment and IoT development.”

“We are excited and believe that Wireless Telecom is the ideal partner to accelerate our growth initiatives to build upon our successful 9-year history,” said Edward Young, Managing Director and co-founder of CommAgility.  “We share many of the same values including our dedication to innovation and commitment to customer excellence.  We both have deep technical skills and incredible industry talent which together, strengthen our market leadership and create value for our customers, employees and shareholders.”

Benefits of the Combination:

Enhances our value proposition across both our Network Solutions and Test & Measurement segments

• CommAgility’s technology is uniquely synergistic with WTG’s business, enabling new market applications and greater differentiation.

Accelerates expansion into fast growing markets, positions Wireless Telecom to support capacity requirements related to emerging 5G networks

• Wireless Telecom becomes a vital supplier of signal processing technology for network validation systems supporting LTE and 5G deployments.

Enhances our scale and expands our total addressable market  

• CommAgility is expected to add approximately $10m USD of annual revenue to the combined business; on a pro-forma basis, the combined businesses generated revenue and Adjusted EBITDA (1)  of $39.9 million and $2.1 million respectively for the twelve months ending September 30, 2016.

Adds deep LTE software and embedded hardware design expertise, and accelerates Wireless Telecom’s product roadmap

• Adds over 30 engineers with software and hardware design skills to the combined enterprise and adds exceptional talent solving LTE and customized 4G/5G solutions.

Immediately accretive to margins and earnings, attractive purchase multiple and purchase structure aligned to shareholder interests  

• The acquisition is expected to be immediately accretive to Wireless Telecom’s gross and Adjusted EBITDA margins.  Total purchase consideration including an estimated range of earn-outs is expected to be between 4.5x and 6.2x CommAgility’s 2018 UK GAAP Adjusted EBITDA.  Upfront equity consideration and employment agreements for the 4 founders aligns long-term equity interests.

The combination of Wireless Telecom and CommAgility brings together two complementary companies with common core competencies designing custom and semi-custom RF solutions for overlapping end markets.  CommAgility expects continued momentum designing custom LTE network solutions for the U.S. defense market, where Wireless Telecom has an entrenched position with its Boonton and Noisecom businesses.  CommAgility also significantly enhances the Company’s Microlab offering for small cell and distributed antenna systems supporting carriers’ ever growing need for network coverage and capacity.

The initial purchase price for CommAgility is comprised of $12.5 million in cash and $6.25 million of Wireless Telecom common stock.  The total purchase consideration includes up to $12.5 million of additional cash consideration in the form of a 24-month earn-out.  The cash portion of the consideration at close was funded from a combination of cash on hand and borrowings from a newly issued senior credit facility from Bank of America, N.A.

The Board of Directors of both companies unanimously approved the transaction which closed simultaneously with the execution of the definitive agreement.  B. Riley & Co., LLP is serving as exclusive financial advisor to Wireless Telecom Group and Bryan Cave LLP is serving as legal counsel.  Convex Capital is serving as financial advisor and Rosenblatt LLP is serving as legal counsel to CommAgility.

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