SecProbe.io

CORRESP
1
filename1.htm

corresp

[Letterhead of Akin Gump Strauss Hauer & Feld LLP]

July 9, 2007

VIA EDGAR

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, DC 20549-0407

    Attn.:

    Pamela A. Long

Assistant Director

Division of Corporation Finance

Re: Quanta Services, Inc.

         Re:

    Responses to Comments on Amendment No. 1 to the Registration Statement on Form
S-4 filed by Quanta Services, Inc. on May 29, 2007 (File No. 333-142279) and Quanta
Services, Inc. Form 10-K for the year ended 12/31/2006 Filed February 28, 2007 (File
No. 001-13831)

Dear Ms. Long:

     Quanta Services, Inc. (“Quanta”) today filed Amendment No. 2 to its Registration
Statement on Form S-4 (File No. 333-142279) (as amended, the “Registration Statement”). This
letter, which is being submitted on behalf of Quanta and InfraSource Services, Inc.
(“InfraSource”), responds to your letter, dated June 22, 2007, relating to the comments of the
staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) in connection with
the above-referenced filings.

     The responses to the Staff’s comments are numbered to relate to the corresponding comments in
your letter of June 22, 2007. For your convenience, we have also included the text of each of the
comments in bold. In general, the information contained in this letter with respect to Quanta has
been furnished by Quanta and the information contained in this letter with respect to InfraSource
has been furnished by InfraSource. All page references contained in the responses in this letter
are to the pages of the Registration Statement in the form filed today with the Commission.
References in this letter to the “Merger Agreement” are to the Agreement and Plan of Merger, dated
as of March 18, 2007 by and among Quanta, Quanta MS Acquisition, Inc. (“Quanta MS”) and
InfraSource, and references to the “Merger” are to the transactions contemplated by the Merger
Agreement pursuant to which InfraSource will merge with and into Quanta MS and become a wholly
owned subsidiary of Quanta.

General

    1.

    We note your response to comment 2 of our letter dated May 17, 2007. Please advise us as to
why the projections are not material.

    Response:

    Quanta and InfraSource each believes that the forecasts prepared by it are not material and
would not assist its stockholders in making an informed decision regarding, in the case of
the Quanta stockholders, approving the issuance of Quanta common stock in the Merger and, in
the case of the InfraSource stockholders, adopting the Merger Agreement for the following
reasons:

    A.

    Numerous factors and information were considered by the boards of directors of
Quanta and InfraSource in connection with their respective reviews of the Merger. In
connection with the approval of the Merger, neither Quanta nor InfraSource prepared
specific projections of the combined entity resulting from the Merger that analyzed in
detail the actual future estimates of financial results that might be expected to be
achieved by the combined entity. Instead, each party provided to the other party, for
due diligence purposes, existing forecasts of its own business on a stand-alone basis
that had been previously prepared for such party’s internal budgeting purposes. Each
party considered the other party’s forecasts as reasonably prepared for the purposes of
due diligence in the transaction but did not necessarily view or intend any aggregation
of the separate forecast information to be deemed as actual estimates or projections of
the future performance of the combined entity.

    B.

    As noted above, the Quanta board of directors considered multiple factors in
its decision-making process that were deemed material by it and are described and set
forth on pages 42-44. Likewise, the InfraSource board of directors considered multiple
factors in its decision-making process that were deemed material by it and are also
described and set forth on pages 44-46. Relative weights to any of the multiple
factors considered were not assigned by either of the boards of directors. While the
forecasts of the other party, including the more reliable 2007 information that was
prepared for current year budgeting purposes, were utilized as an indicator of whether
the Merger would serve the best interests of a party’s stockholders, neither the Quanta
board of directors nor the InfraSource board of directors relied on the forecasts of
the other party as a key determinative factor in approving the Merger. Consequently,
neither board’s recommendation to its stockholders was contingent on such forecasts and
the exclusion of the forecasts from the Registration Statement would not deprive the
stockholders of either Quanta or InfraSource from information that was specifically
material to their board of directors in approving the Merger. Furthermore, based on
the advice of each company’s antitrust counsel to maintain confidentiality of
competitive information regarding its customers, neither company was able to review
specific pending, proposed or anticipated bids for projects, existing or pending
contracts or detailed customer information of the other party, which information is
critical

2

    to understanding the assumptions for bidding, estimated future project awards and
timing and implementation of future projects on which the forecasts were based.
Without the ability to verify this information and, therefore, to evaluate many of
the key assumptions underlying the forecasts, it would have been difficult for
either company’s board of directors to give material determinative weight to such
forecasts prepared by the other party or information aggregating the separate
forecasts of the two parties. Moreover, given the nature of the businesses of
Quanta and InfraSource, the forecasts prepared by each party are subject to inherent
uncertainty and numerous risks (including the success rate for bid projects, the
timing and implementation of projects and contracts, the impact of weather
conditions and adverse changes in the markets served by Quanta or InfraSource or in
the businesses of either company) that were beyond the ability of either company to
control or predict. The information did, however, give each board a valid
perspective in its due diligence of the transaction.

    C.

    The companies believe that the inclusion of any forecasts would be misleading
to the stockholders of Quanta and InfraSource because of the significant number of
assumptions made in creating such forecasts and because of the risk that stockholders
would be misled by combining the separate forecasts of the two companies and would deem
such combined information as projections of future results. Based on its integration
plans, however, Quanta believes that the only useful forward looking information
prepared in connection with the Merger is the expected cost savings and operational
synergies, including approximately $20 million in 2008 related to the Merger, which is
disclosed on page 43. While these expectations and synergies are subject to risks and
uncertainties as described under “Risk Factors”, including those associated with the
ability to realize the anticipated benefits of combining the two companies, Quanta is
comfortable with such disclosure of this forward looking statement based on its near
term expectations and quantifiable integration plans.

Comparative Quanta and InfraSource Market Price Data, page 23

    2.

    Please provide equivalent per share data for InfraSource stock as of March 16, 2007, as
required by Item 3(g) of Form S-4.

    Response:

    In response to the Staff’s comment, the disclosure on page 23 has been revised.

3

The Merger, page 33

Background of the Merger, page 33

    3.

    We note your response to comment 17 of our letter dated May 17, 2007. Please revise your
disclosure regarding the December 8, 2005, meeting to clarify that no specific acquisition
proposal was made at that time. Please also revise your discussion to disclose the parameters
of the “possible acquisition of InfraSource by Quanta” that were discussed at the board
meeting.

    Response:

    In response to the Staff’s comment, the disclosure on pages 33-34 has been revised.

    4.

    We note your response to comment 19 of our letter dated May 17, 2007. Please revise your
discussion to disclose that you were not involved in discussions with any alternative parties
to Quanta after February 2006.

    Response:

    In response to the Staff’s comment, the disclosure on page 34 has been revised.

Opinion of Quanta’s Financial Advisor, page 46

Selected Company Analysis, page 50

    5.

    We note your response to comment 26 of our letter dated May 17, 2007. Please revise your
discussion to disclose whether other companies meeting the stated criteria (publicly traded,
similar industry with similar lines of business, and market value between $550 million and
$1.1 billion) were identified by Credit Suisse in its analysis. If so, please revise to name
these companies and to disclose why each was determined to be incomparable to InfraSource or
Quanta.

    Response:

    In response to the Staff’s comment, the disclosure on page 50 has been revised.

Opinion of InfraSource’ s Financial Advisor, page 51

Analysis of InfraSource, page 53

Comparable Public Companies Analysis, page 54

    6.

    Please respond to prior comment 26 with respect to the comparable public companies analysis
performed by Citigroup in its evaluation of InfraSource.

    Response:

    In response to the Staff’s comment, the disclosure on page 54 has been revised.

4

Analysis of Quanta, page 55

Comparable Public Companies Analysis, page 55

    7.

    We note your response to comment 26 of our earlier comment letter with respect to Citigroup’s
comparable public companies analysis of Quanta. Please briefly expand the discussion of
Quanta’s unique characteristics that set it apart from the companies included in Citigroup’s
analysis of InfraSource. In addition, please briefly discuss the utility of a comparable
public companies analysis that evaluates only the parties to the transaction.

    Response:

    In response to the Staff’s comment, the disclosure on page 56 has been revised.

Discounted Cash Flow Analysis, page 56

    8.

    We note the statement that the selected terminal EBITDA multiple range “was based on the
historical and current range of multiples for publicly traded companies.” Please revise to
clarify whether the companies included in calculating the range were the same as in the
Comparable Public Companies Analysis or in another analysis performed by Citigroup. If
companies other than InfraSource and Quanta were used, please briefly address why such
companies terminal 2011E EBITDA multiples were useful to this analysis in light of such
companies’ exclusion from the Comparable Public Companies Analysis due to “Quanta’s unique
growth characteristics, operations profile and end markets served.”

    Response:

    In response to the Staff’s comment, the disclosure on page 55 has been revised to disclose
that information of the four other comparable public companies was used in the discounted
cash flow analysis of InfraSource and the disclosure on page 56 has been revised to clarify
that only information of InfraSource and Quanta was used in the discounted cash flow
analysis of Quanta.

Financial Statements

Notes to Unaudited Pro Forma combined Financial Statements

Note 2(a)— Purchase Price, page F-6

    9.

    We note your response to our previous comment 38 and appreciate the additional information
about acquired backlog. We have the following additional comments:

    •

    Pro forma Note 2(f) states that the acquired backlog has a weighted average
life of 2.28 years. However, we read on page 6 of InfraSource’s December 31, 2006 Form
10-K that they expected to complete about two- thirds of their backlog during 2007.
Please tell us whether your calculation of weighted average life for backlog differs
from what InfraSource relied upon in creating its 10-K disclosure, and if so, please
explain how and why. In this regard, we read in your response that you assigned a 19
year useful life to

5

    acquired backlog related to Telecommunications Services, and it is unclear to us why
such a long life would be appropriate.

    •

    Please explain to us in more detail how you considered InfraSource’s master
service agreements in calculating acquired backlog. If your methodology differs from
the disclosures on page 6 of InfraSource’s 10-K, please explain how and why. In this
regard, we note your response to our prior comment 42.

    •

    Please provide us with a more detailed explanation of how you calculated
the future cash flows associated with InfraSource’s backlog. If your valuation
included any consideration of whether the acquired backlog contracts were favorable or
unfavorable compared to the market or compared to “normal” margins, please explain this
to us in reasonable detail. Refer to paragraphs B17l through B174 of SFAS 141.

Response:

Please note that Quanta is responding to each sub-request asked by the Staff by providing
its answer following each bullet point below.

    •

    Pro forma Note 2(f) states that the acquired backlog has a weighted average
life of 2.28 years. However, we read on page 6 of InfraSource’s December 31, 2006 Form
10-K that they expected to complete about two-thirds of their backlog during 2007.
Please tell us whether your calculation of weighted average life for backlog differs
from what InfraSource relied upon in creating its 10-K disclosure, and if so, please
explain how and why. In this regard, we read in your response that you assigned a 19
year useful life to acquired backlog related to Telecommunications Services, and it is
unclear to us why such a long life would be appropriate.

InfraSource determined the amount disclosed as backlog in its December 31, 2006 Form 10-K by
estimating the amount of revenue expected from work to be performed on uncompleted
contracts. Alternatively, Quanta valued the intangible asset associated with the
InfraSource backlog to be acquired in the Merger based on the present value of the expected
net cash flows produced by the backlog.

The longer weighted average life for the acquired backlog is attributable to the impact of
the higher margins earned by the InfraSource Telecommunication Services segment as compared
to the InfraSource Infrastructure Construction Services segment. As calculated from
information disclosed on page 87 of InfraSource’s December 31, 2006 Form 10-K,
Telecommunication Services had operating margins of 46.3% compared to 5.1% for the
Infrastructure Construction Services for the year ended December 31, 2006. Additionally,
Telecommunication Services current revenue projections are through the year 2025 based on
contractual obligations existing as of March 31, 2007. The higher margins and longer
contractual terms of the Telecommunication Services backlog extended the weighted average
life of the total acquired backlog as Telecommunication Services contributes a

6

higher percentage of cash flows relative to the total acquired backlog than the percentage
of revenue it contributes for total revenue backlog disclosed by InfraSource.

As stated above, the Telecommunication Services current revenue projections are through the
year 2025, or nineteen years, based on contractual obligations existing as of March 31,
2007. Quanta therefore concluded that the amortization of the backlog intangible asset
associated with Telecommunication Services will be over a nineteen year useful life based
upon the economic consumption of the backlog.

    •

    Please explain to us in more detail how you considered InfraSource’s master
service agreements in calculating acquired backlog. If your methodology differs from
the disclosures on page 6 of In