Insights

Cerberus Capital Management has successfully closed a $2.3 billion single-asset continuation vehicle (CV) for SubCom (Subsea Communications), marking one of the largest-ever secondary transactions in the subsea cable industry and significantly extending the private equity firm's ownership of America's sole submarine cable manufacturer.

The transaction, announced on April 20, 2026, was led by CVC Secondary Partners and includes an additional investment from Cerberus-managed funds, particularly those associated with the firm's dedicated Supply Chain strategy. Cerberus funds will continue to own a controlling stake in SubCom, extending a partnership that began with the initial carve-out from TE Connectivity in 2018.

Understanding the Single-Asset Continuation Vehicle (CV)

Before diving into the transaction details, it is essential to understand what a single-asset continuation vehicle represents in private equity. A CV is a secondary market transaction in which a general partner (GP) transfers a single portfolio company from an existing fund into a newly created vehicle, allowing the GP to extend ownership of a high-performing asset beyond the original fund's lifespan.

Key features of a single-asset CV include:

The CV structure has emerged as a "fourth exit route" alongside IPOs, trade sales, and secondary buyouts, particularly attractive for assets where the GP believes significant value creation remains ahead.

Transaction Structure and Key Players

The involvement of CVC Secondary Partners, which manages substantial assets across secondary private markets globally, validates SubCom's position as a premier infrastructure asset. Ardian, another major player in the single-asset CV space, has noted that SACV deals have exhibited many attractive features including limited "J-curve" effects and buyout-like performance with lower dispersion of returns.

SubCom's Market Position: America's Sole Subsea Champion

SubCom occupies a uniquely strategic position in the global subsea cable industry. It is the only U.S.-based provider of turnkey subsea fiber optic cable systems. The company's vertically integrated operating platform spans engineering and planning, manufacturing, marine installation, and maintenance—a comprehensive capability set that few competitors can match.

• Vertically Integrated Platform: SubCom controls the entire value chain from cable manufacturing to deep-sea installation
• Global Scale: The company operates a fleet of specialized cable-laying vessels based in Baltimore and Portsmouth
• Historical Legacy: SubCom has deployed enough cable to circle the equator more than 25 times since entering the communications industry

Market Share and Competitive Landscape

According to industry data, the global subsea cable integration market is dominated by four major players. SubCom holds a leading position with approximately 40% of the global market share by deployed cable length. The competitive breakdown is as follows:

NEC, which holds approximately 20% of the global market, has announced plans to invest over 100 billion yen (approximately $629 million) in its submarine cable business over the next five years, including acquiring up to five dedicated cable-laying and maintenance vessels. This investment reflects the intensifying competition in the sector, with NEC targeting increased market share through government-backed "official-private collaboration".

The market exhibits moderate concentration, with the top four players controlling more than 90% of the market worldwide. This oligopolistic structure creates significant barriers to entry, reinforcing SubCom's position as a critical national asset.

Strategic Rationale: The AI-Driven Demand Surge

The timing of this continuation vehicle reflects a profound shift in the subsea cable industry's demand dynamics. Subsea cables underpin approximately 99% of intercontinental data traffic and are foundational to the global digital economy. Demand for these systems is accelerating rapidly, driven by three primary forces:

Cloud Computing Expansion

Hyperscalers—Google, Microsoft, Meta, and Amazon—are no longer content to merely lease bandwidth. They are funding, owning, and designing cables themselves. Equity stakes bring predictable costs, tailored routes, and greater control over the digital arteries that feed their global platforms.

Artificial Intelligence Bandwidth Requirements

AI training and inference workloads, real-time data synchronization between cloud regions, and the movement of vast datasets across continents require not just more bandwidth, but lower latency, higher reliability, and greater redundancy than existing infrastructure can comfortably sustain.

Geopolitical Supply Chain Security

As the only U.S.-headquartered provider of subsea cable systems, SubCom occupies a critical position in the context of national security and supply chain resilience. Cerberus' dedicated Supply Chain strategy explicitly "seeks to advance the interests of the United States and allied partners in domains critical to the future".

Successful Carve-Out

The acquisition and subsequent reorganization of SubCom by Cerberus Capital Management is widely considered one of the most successful "carve-out" plays in the modern digital infrastructure era. By acquiring an "unloved" industrial unit and transforming it into a mission-critical "sovereign" provider, Cerberus achieved extraordinary financial returns.

Below is the consolidated financial analysis of the transaction as of April 21, 2026.

Core Financial Information (2018–2026)

SubCom's transformation was driven by shifting from a "minimally profitable" division to a high-margin standalone leader in the hyperscale and AI build-out super-cycle.

To understand the magnitude of this transaction, one must revisit Cerberus' original acquisition of SubCom. In September 2018, TE Connectivity announced the sale of its subsea communications business to Cerberus for $325 million in cash.

Because SubCom is private, it does not publish public 10-Ks. However, industry benchmarks and Cerberus’s investor communications provide a clear trajectory:

• Revenue Growth: SubCom has benefited from a "super-cycle" in subsea builds driven by Google, Meta, and Amazon. Estimated annual revenues have climbed from ~$1.2 billion in 2021 to ~$1.8 billion - $2.0 billion by 2025.

• EBITDA Margins: As a vertically integrated manufacturer (it owns its own fleet of cable-laying ships), SubCom enjoys higher margins than pure service providers. Estimated EBITDA margins are in the 12% to 15% range.

• Estimated 2025 EBITDA: Based on the $2.3B valuation and industry positioning, SubCom’s LTM (Last Twelve Months) EBITDA is estimated at $240 million to $270 million.

The seven-year transformation from a $325 million carve-out to a $2.3 billion continuation vehicle represents a remarkable value creation story, underscoring the strategic repositioning of SubCom within the global digital infrastructure ecosystem.

Cerberus transformed SubCom from a division into a standalone global leader through three key pillars:

• Vertical Integration: Cerberus invested heavily in SubCom's specialized fleet and its manufacturing facility in Newington, NH, making it the only vertically integrated subsea provider in the U.S

• Backlog Management: Under the leadership of Dave Coughlan, SubCom transitioned from chasing small projects to securing multi-year, multi-billion-dollar contracts. By 2024, SubCom reported a record$4.7 billion backlog

• Financial Discipline: Cerberus utilized several dividend recapitalizations (notably in 2025) to extract early cash for its original investors while maintaining a stable credit rating (B+ by S&P).

EV/EBITDA Multiplier Analysis

The April 20, 2026, closing of the $2.3 billion Continuation Vehicle (CV) serves as the valuation "mark" for the current era.

• Enterprise Value (EV): $2,300,000,000
• Implied EBITDA (LTM): ~$255,000,000 
• Implied Multiplier: 9.0x EV/EBITDA

Analyst Insight: A 9x multiple is a "strategic premium" compared to legacy telecom operators (typically 5x-7x). This premium is justified by SubCom's "Sovereign Moat"—it is the only U.S.-headquartered firm capable of end-to-end transoceanic builds, making it indispensable for "Trusted Network" initiatives.

ROI (Return on Investment) Summary

Cerberus utilized a "multi-layered" exit strategy, extracting cash early through debt markets while retaining long-term upside through the 2026 "reset."

• Initial Equity Invested (2018): $325 Million (Cash purchase)
• Dividend Recapitalization (2025): +$1,600 Million (Cash returned to Cerberus via debt issuance)
• Continuation Vehicle Valuation (2026): +$2,300 Million (Value of the "reset" equity/enterprise)
• Total Value Created: ~$3,900 Million
• Multiple of Invested Capital (MOIC): 12.0x

IRR (Internal Rate of Return) Calculation

The IRR accounts for the timing of the cash flows over the 7.4-year hold period (Nov 2018 to April 2026).

• Holding Period: ~89 Months
• Calculated IRR: ~78.5%

Why is the IRR so high?

• Low Entry Basis: Buying the asset for $325M (less than 0.5x sales) in 2018 was a massive bargain in hindsight.
• The 2025 "Cash Out": Returning $1.6B in cash (nearly 5x the original cost) a full year before the final deal significantly accelerated the time-weighted return.
• Vertical Integration: Cerberus optimized SubCom's fleet of cable-laying ships, allowing them to capture the high-margin "Installation" revenue that competitors often outsource.

Final Verdict: The "Sovereign Industrial" Blueprint

The SubCom deal proves that industrial sovereignty is the most valuable currency in 2026. Cerberus didn't just buy a cable company; they bought the only U.S. "factory" for the internet's physical layer. At a 12x MOIC and 9x EBITDA multiple, SubCom stands as a blueprint for how private equity can revitalize "neglected" divisions into national champions.

The $2.3 billion single-asset continuation vehicle for SubCom represents a landmark transaction in the subsea cable industry. It validates Cerberus' value creation strategy since the 2018 carve-out from TE Connectivity, provides liquidity to original investors while maintaining control, and positions SubCom for continued expansion in an AI-driven demand environment.