R&G Tech Studio Presents: Energy & Infrastructure Co-Leader Taylor Hart

In this episode of the R&G Tech Studio, energy & infrastructure co-lead Taylor Hart sits down with technology, media & telecommunications co-lead Ed Black to discuss his private equity transactions practice, and shares some insights about the interconnectivity of the data infrastructure ecosystem.

---

Transcript:

Ed Black: Hi, this is Ed Black and I want to welcome everyone to the latest edition of our R&G Tech Studio podcast series. I am very pleased that I’m here today with my partner and my friend, Taylor Hart. Taylor is key to our tech practice, particularly in the area of data infrastructure, and telecom infrastructure. Taylor, welcome to the podcast. Could you just give name, rank, and serial number, just basic facts so people understand who you are?

Taylor Hart: Sure. I’m a partner in our private equity transactions practice, resident in the Boston office. What that means is I mainly do merger and acquisition-type transactions for private equity firms and the portfolio companies that they own.

Ed Black: That sounds great. Is your practice focused on the New England region, or national, or global? How do you see the geographic footprint?

Taylor Hart: It’s not necessarily specific to New England, although a few of the clients that I spend most of my time with are based in the Boston area. Most of my practice is involving North American businesses or target businesses. I have done some international cross-border transactions as well, but that’s a smaller part of my practice.

Ed Black: Great. Alright, now let’s dig in a little bit on the tech piece. Tech is such a large subject—it covers everything from iPhones to industrial equipment and everything in between. How does your practice focus on tech, and what do you do in the tech sector?

Taylor Hart: In addition to tech generally, which is most of my practice involving software and other tech-related businesses, a large part of my practice relates to the topic we’re talking about here, which is, depending on different terms people use, data infrastructure, digital infrastructure, or telecom and other IT infrastructure and infrastructure services. That’s become a large part of my practice within tech.

Ed Black: And what do you do in general? Can you give us some concrete examples?

Taylor Hart: Sure. Generally, the types of transactions have included data centers, edge data centers, fiber, cell tower transactions, some joint ventures that have included some hyperscale joint ventures and other fiber joint ventures, and also a variety of IT-related services that relate to some of these businesses, including managed security or other services provided to participants in the industry.

Ed Black: You mentioned managed security, and I realize I’m not sure I know what that is. I do have some questions about these deals, and we’re going to come back to that, but maybe just one second just not on what you do or the legal piece, but what exactly is this infrastructure that your clients are investing in? How would you describe it?

Taylor Hart: It depends a little bit on the transaction. As I said, the infrastructure itself can be different, whether it’s fiber, which is connecting different locations, which could be cell towers or buildings.

Ed Black: Fiber is people who own fiber optic cables buried in the ground?

Taylor Hart: Correct, yes. It connects cell towers and buildings to each other—that’s the backbone of how a lot of information travels. It could involve cell phone towers. It could involve data centers, which are also interconnected by fiber, as well. The infrastructure itself depends on the particular transaction, but it’s all part of the ecosystem of data or digital infrastructure, and how that information travels, or is housed.

Ed Black: Or is housed, right. And things like managed security, you need guards at the data center, I take it. You mentioned that there’s related services—there must be people who build cell towers, people who maintain that, and all that is in scope, as well?

Taylor Hart: Yes, for sure. Although, that hasn’t necessarily been part of some of the things we’ve done. But, yes, managed security is often a security service provided as part of the infrastructure where it monitors what’s going on in networks, for example. But certainly, data centers have extensive security operations to protect the facility, and there’s lots of other things that go into that in terms of maintaining power, generators, and other things that have to make sure that it continues to operate. There’s a whole ecosystem of others that maintain, for example, servers at data centers or other businesses that service the industry more broadly.

Ed Black: Before I took us down this path of just describing the ecosystem a little bit, you were talking about the deals you do. Can you pick one? Is there an example of something that would just illustrate how these things work?

Taylor Hart: One interesting deal or series of deals we did started about 10 years ago, actually, and was when I did just a little bit of this kind of work and this led to me doing a lot more of it was a complicated transaction where we were doing two acquisitions at the same time—two companies called Lightower Fiber Networks and Sidera Networks (two metro fiber providers mainly in Boston and New York). It involved buying those two businesses at the same time in the transaction that happened simultaneously. And then, over time, we did a lot of work for that combined business, including another large acquisition, and then ultimately, a sale of that larger combined business several years later to Crown Castle in a multi-billion-dollar exit transaction. So, it was a rewarding progression of the original deal through a very large add-on acquisition to ultimately the sale—it was a rewarding path with a number of people involved with those companies.

Ed Black: And in all of those deals, you were leading the team that got those deals done?

Taylor Hart: Yes.

Ed Black: Especially because you mentioned doing two of them at once, did you just not sleep? Maybe Ropes & Gray has a bench and you can pull people in. How do you scale up and scale down to handle deal flow?

Taylor Hart: It was definitely a busy time for me personally, but we’re also lucky, as I know you know, with a great bench of people here, both our fellow partners but also great teams of associates who support us and are able to help us scale up quickly when we need to for larger transactions like that with a lot of interconnected pieces that all need to come together at the same time. We’ve got great people here that can help us do that.

Ed Black: One of the things you mentioned that struck me about the ecosystem you were describing is that all these pieces, they all depend on other pieces—the data centers depend on the fiber, all of the wireless communications depend on the cell towers, and then, of course, all of it depends on the security, the janitors, and everyone who keeps it running. It must be that in this industry, because of all these interdependencies, there must be opportunities for joint ventures or collaborative deals where somebody does one part of it, your client does a different part of it, and you assemble solutions. But does that ever happen, and is that anything you get involved in?

Taylor Hart: Yes, there’s definitely a lot of activity in people looking at joint ventures in the last few years, particularly with some of the operating kinds of businesses that are looking to not have to provide the capital for it. And so, they’ve looked to financial investors like some of our private equity clients or others, like infrastructure funds, to provide some of the capital to build out large data centers, for example, or other types of infrastructure with some sort of a joint venture where one party can provide the expertise, another party can provide some of the capital, so that the operator providing the expertise doesn’t have to put up all of its own capital to continue to build out its own infrastructure.

Ed Black: Interesting. I have two questions when you say that operator doesn’t want to put up their own capital, I imagine that kind of thinking gets worse as interest rates go up. When you just read in the paper every day about interest rates rising and rising and rising, there must be just more and more opportunity for these types of collaborations if money’s getting expensive?

Taylor Hart: Certainly, yes. And even when, as these have happened in the past before interest rates were rising, it was also something that part of the reason for it, I think, is it the best use of their capital to be tying up their own capital in all of the development of their own infrastructure?

Ed Black: The second question, just to follow up on this a little, is there an example of a collaboration, a joint venture, something you worked on that illustrates this?

Taylor Hart: Yes. One interesting one—it wasn’t technically a joint venture for a variety of reasons, but it effectively was a joint venture where our client set up a new business to develop cell towers, and the reason it wasn’t a joint venture is because our client was the owner of that business. But through a series of contractual arrangements we created this entity, which over time, built and acquired a number of cell phone towers. And then, ultimately, it led to selling that entity a few years down the road in a subsequent transaction.

Ed Black: Interesting. So, they partnered with your clients to get all this stuff done because they couldn’t get it done inside their framework, but once it was done, they loved it so much they bought it.

Taylor Hart: Yes, it effectively allowed them to be developing towers at a time when they didn’t want to be using their own capital to do it, but ultimately ended up owning the entity down the road.

Ed Black: Nice. Alright, just a couple more questions. The first one is, particularly in this area, what I’m going to call this “data infrastructure ecosystem.” Let’s just look ahead for a second—are there things happening down the road that you think are going to have a big effect on your clients, your practice, this data infrastructure ecosystem?

Taylor Hart: Yes. I think a continuation of the theme that we were just talking about will probably be the case in terms of creative arrangements for others to provide capital to develop different infrastructure in the space. But also, I think there’s other things going on, such as the rapid growth in the use of data, the consumption of data, and the number of connected devices that we all now see in the world leads to more and more need for infrastructure of all kinds. And potentially other things, like additional capital potentially available through the recent infrastructure bill—federal funding in the infrastructure space may also catalyze some aspects of this, as well. Those are just a couple of examples—there’s obviously a lot happening more broadly, but a couple of recent examples.

Ed Black: As the world evolves, are there things that you do, that Ropes does, to help everybody make sure that they’re on top of, in front of, on the leading edge of these issues and their deals, and in the way they are solving their own problems?

Taylor Hart: Certainly. One of the things we do is, just in terms of the legal issues involved in these transactions, which can be different depending on the type of transaction, there can be very different issues depending on the deal. So, we spend a lot of time coordinating and have a great team internally keeping track of what’s going on in the market for deals, and so, we have a good and extensive knowledge management process where we’re keeping track of different deals, and the terms in those deals, and how they relate to what’s going on in the market—in addition to just broadly keeping in touch with clients and what they’re seeing and what kind of trends that they may be looking at or things that they’re considering, and how that might relate to future transactions that we might see.

Ed Black: So, a client comes to you with a question—you’re going to be able to give that client a context and a landscape that fills gaps, that situates the client against the current market practice and say, “This is what your deal might look like or could look like or should look like, measured against the market generally.” Is that how it works?

Taylor Hart: That’s right. And because we track these things and we’ve been involved in a number of related transactions, I think we’re able to help navigate that quickly because we’re able to reference things that may be directly on point or very close to on point quickly for them.

Ed Black: Alright, we just have a couple minutes left—I want to shift gears. This is the portion of the podcast I sometimes call the personality test—just some questions about you. Just go with me, Taylor—just go with me here, alright? I’ll start with an easy one: Do you have a favorite movie?

Taylor Hart: Field of Dreams, which is consistent with the theme of I’m a big baseball fan.

Ed Black: You are?

Taylor Hart: I am.

Ed Black: Isn’t that, like, an infrastructure movie? “If you build it, they will come.”

Taylor Hart: Very nice—I guess it is.

Ed Black: And then, what character—who’s your favorite character in that movie?

Taylor Hart: I guess you’d have to say Kevin Costner. I don’t know.

Ed Black: So, he starts as a skeptic, but it’s not any of the old players who come out of the corn field? It’s Kevin himself.

Taylor Hart: Yes, I have to go with the lead, I guess.

Ed Black: Next question: In a peanut butter and jelly sandwich, what is more important, the peanut butter or the jelly?

Taylor Hart: The peanut butter.

Ed Black: Why?

Taylor Hart: Jelly, you can use different kinds of jelly, but peanut butter, I suppose there’s different kinds of peanut butter, but at its core, the peanut butter’s kind of the core of the sandwich.

Ed Black: Right. Wow, you’re just all infrastructure all the time. So, the peanut butter is the structural core that makes the whole thing work, and the jelly, that’s like all the attached phones and devices.

Taylor Hart: It even makes it stick together, right?

Ed Black: It makes it stick together, right—it physically holds it together. Interesting. It seems like a simple question. We’ve asked a lot of people that question, and no one has given the same answer. And I do think your answer is one of the best ones. Alright, Taylor, we’re out of time. Thank you so much, it’s been an absolute pleasure to have you here on the podcast.

Taylor Hart: Great, thanks for having me.

Ed Black: To all of our listeners, this has been the R&G Tech Studio podcast. It is available up on the Ropes & Gray website, on the R&G Tech Studio podcast page, and also wherever you get your podcasts. I want to thank all of our listeners for joining, as well. Thanks, everybody.