Investment is flooding into connectivity as investors seek yield and take advantage of proposed government funding.\r\n\r\nBroadband infrastructure is the fourth-largest investment category in Congress\u2019 proposed infrastructure bill, just below freight and rail, said <strong>Frontbridge Capital<\/strong> partner James Wagar, a panelist at Broadband Breakfast's Digital Infrastructure Investment 2021, an event that focuses on digital infrastructure and investment asset profiles. The investment firm is seeing transactions at EBITDA multiples of 17x and 18x, which are \u201cvery lofty valuations,\u201d he added.\r\n\r\nThe prospect of government money is the cause, according to Wagar. \u201cOf course, you cannot use government dollars for [mergers and acquisitions], but you could buy an asset and use government money to upgrade it,\u201d he said. \u201cYou could upgrade the existing infrastructure or expand.\u201d\r\n\r\nHowever, investors should understand that the money is delivered over a period of 10 years, private equity firm <strong>M\/C Partners<\/strong> partner Ryan Carr said. Connectivity providers need to have a letter of credit to obtain the money. \u201cSo, guess who does due diligence?\u201d he said. \u201cBankers like us.\u201d\r\n\r\nThe infrastructure bill includes funding for middle mile networks and allows broadband projects to issue tax exempt private activity bonds, noted attorney Lindsay Miller, a partner with law firm <strong>Ice Miller LLP<\/strong>.\r\n\r\nThe provision for tax exempt private activity bonds is federal support even if it is not funding, <strong>Keybanc Capital Markets<\/strong> Managing Director Tom Coverick said.\r\n\r\n<strong>Yield<\/strong>\r\n\r\n\u201cOver the last 18 months, we\u2019ve seen a little bit of a perfect storm,\u201d Coverick added. Traditional bond investors who might have focused on water or energy bonds are diversifying, buying \u201cthings they normally wouldn\u2019t buy that have more yield.\u201d\r\n\r\nInvestors are coming to understand the value of connectivity as they see that it\u2019s not a luxury, he said. \u201cWe\u2019re starting to see a maturation in industry participants, something we would not have been able to talk about a year or year and a half ago.\u201d\r\n\r\nM\/C Partners\u2019 investments include enterprise fiber providers <strong>Zayo<\/strong> and <strong>Everstream <\/strong>as well as <strong>Everywhere Wireless<\/strong>, which provides service to multi-family buildings and commercial clients in nearly 800 buildings in the Chicago area, Carr said. Unlike enterprise customers, \u201cresidential customers do not have 10-year or 20-year contracts, so you need a churn profile including penetration and take rates.\u201d\r\n\r\nInvestments often involve debt as well as equity, although equity can be more flexible and free of covenants, Carr added.