Space at an inflection point; an ever-maturing infrastructure asset class (and… what this means for the lawyer’s offering!)

When I was a junior lawyer a long time ago, I visited the HQ of one of my big clients, a satellite telecommunications network provider. As I looked up, mouth open in awe, I saw what can only be described as a three-storey high mural showing the position of their constellation of GEO satellites by reference to the earth’s surface. Nothing could more visually demonstrate the then barriers to entering the wonderful and expansive non-terrestrial domain above us.  

The sector has changed drastically since then, with thousands more satellites in orbit and space having become much more accessible.

As you read this, you’re probably by this stage thinking this is just another lawyer writing about space or that it is yet another piece about the rise of private capital in New Space (read further…). The latter is of course important as a backdrop to this short piece and, yes, I am another lawyer, a structured/infrastructure finance one to boot. 

But I actually think we have reached an inflection point in this sector. 

I also believe the potential EQT transaction announced with Eutelsat over the Summer, and the ensuing conversations I have more recently been having with various infrastructure sponsor clients of mine, really serves to demonstrate that.

Let’s take a step back first to point out the obvious. It is true that we have seen an ever-growing private capital market in the space sector, fuelled in the large part by what is referred to as “New Space” (the emerging private space industry/space economy). I’ll roll out some selected deals that back this up before continuing the substance of what I am getting at here. The notable examples that come to mind include the Advent transaction acquiring Maxar in 2022, KKR taking OHB private (announced in 2023). Also noteworthy is the HawkEye transaction with BlackRock (also 2023). There are many other recent examples. 

Space should really  be seen as part of the ecosystem that we more broadly refer to as “digital infrastructure”. Mark Boggett, CEO of Seraphim, referred to it not long ago as a “digital infrastructure in the sky”. And it certainly is just that, with everything from satellite supported internet coverage to earth observation, as well as the more effective relaying of data, to name but a few relevant strands.

But what the potential Eutelsat transaction (a carve-out of its ground station business) underscores to me personally more than anything – taken together with all of the above – is that the sector should, more and more, be viewed a mature infrastructure investment proposition. The deal would be a first of its kind and comparisons have been made to the TowerCo model and an expectation that larger space sector players may start to spin off their passive infrastructure in the way telecom companies had started to do. EQT also commented publicly on how best practice from data centre carve-out transactions was also relevant. 

While there are a multitude of ways of interpreting all of this, what is relevant for my profession? Two things from my perspective. Firstly, a greater emphasis on diligence given deal sizes increasing, the growing maturity of the sector and an expectation of more large ticket M&A, and the need to have a deep understanding of the sector to facilitate this from a legal perspective. Secondly, and as deals become larger and best practice is applied from other infrastructure transactions, being able to not only leverage off experience from deals in other sectors (the importance of this can’t be underestimated), but also advising on the nuances which can make a large (multi-jurisdictional) space transaction quite different from a practical structuring, risk profile and regulatory perspective, such as national security, licensing and spectrum rules.

The conversations we have been having with sponsors, and other clients such as banks and corporates, have shown the need for a legal services offering which is able to offer these things on a cross-practice basis, both leveraging off other relevant infrastructure experience, but also having a genuine expertise in the space sector. At Linklaters, we have this “one stop shop” offering, with a leading specialist space practice that sits across all the key disciplines, from finance and M&A, to disputes, regulatory and anti-trust. Please get in touch if you’re planning an adventure into this exciting sector or are already active in it and want to chat and compare notes.