2010 Web Hosting Industry Year in Review – Mergers and Acquisitions
By Liam Eagle, December 30, 2010. The Web Host Industry Review
It was a huge year for consolidation and acquisition in the hosting space – a year that saw private equity and other institutional investors acting on a growing interest in the managed hosting and cloud market with some major moves.
The object here is obviously to look back on some of that hosting industry M&A activity in 2010, and provide a bit of a big-picture look, but let’s get it out of the way right now that it would be next to impossible to be anything approaching exhaustive in this article.
There were almost 230 articles tagged “mergers and acquisitions” published on the WHIR in 2010. And while there was certainly some follow-up on certain stories, a lot of those deal with specific deals.
The only way to handle this task in any sort of digestible length, therefore, is to focus on just a few specific big deals, and to narrow our focus down to just the web hosting portion of the business (leaving out, for instance, the many deals that happened in the wholesale data center market). Please don’t let that stop you from going back through the material if you like.
The largest and possibly the most significant acquisition to conclude in the hosting space this year was Equinix’s acquisition of Switch and Data, a deal that combined two of the handful of publicly traded hosting companies into a single organization.
The deal, which valued the company at $683 million, began in October of 2009 – in a sense it wasn’t really news in 2010. More of a wrapping up of a deal that was big news in the fall of last year. The main focus of the deal, according to Equinix, was to expand its data center presence in to 16 new markets in the US.
The first significant acquisition that took place entirely within the 2010 calendar year was Savvis’s acquisition of Canadian managed hosting provider Fusepoint, which was first announced in June, and concluded in June.
Savvis acquired Fusepoint from M/C Venture Partners for $124.5 million in cash, saying the acquisition was a big step toward its goal of expanding into new geographic markets, specifically, in this case, into the major Canadian market of Toronto, as well as others.
In an acquisition dealing with hosting on a smaller scale, small business hosting provider Web.com announced in June that it would acquire domain registrar and hosting provider Register.com.
According to Web.com, the $135 million acquisition had the potential to create a tremendous number of cross-selling opportunities, because the companies had complimentary customer bases and complimentary product sets.
The deal was completed in August.
In another of the largest, and possibly the most disruptive, acquisition stories to come out this year. Private equity firm GI Partners revealed in August that it had acquired a majority interest in managed hosting firm SoftLayer. No financial details of the acquisition were made available.
The deal was particularly notable for a few reasons, the most prominent of which was the significant history, bad blood and ongoing litigation between SoftLayer and GI’s significant existing hosting property The Planet. However, there was also a great deal of obvious synergy between the companies. There was a tremendous amount of speculation, but very little real detail, into GI’s plans for merging the two firms surrounding the announcement.
Details of the group’s plans for merging the two companies followed shortly thereafter. But the companies entered a lengthy period of relative silence as they hammered out the details of the fairly complex merger plan.
In November, the companies announced that they had completed the merger, organizationally, of the two companies (under the SoftLayer brand), as well as the beginning of what they expected to be a months-long technical integration process. The following week, they announced that they had begun merged operations, including some integration of the two user control panels.
In September, we reported on a deal that saw the management of hosting and data center firm Peak 10, along with private equity firm Welsh, Carson, Anderson & Stowe, buy a majority stake in Peak 10. The announcement said Peak 10’s management team would continue to operate the company.
Also in September, private equity firm Oakley Capital announced that it had sold European hosting provider Host Europe to Montagu Private Equity for $344 million. Earlier in the year, Host Europe had acquired virtualization provider vanager. Notably, Oakley had acquired Host Europe in 2008 for $198 million, in a deal that also included Vialtus Solutions.
In a not-exactly-acquisition story that surfaced in September, the Wall Street Journal reported that hosting provider Go Daddy was on the market, and was believed to be asking for something in the vicinity of $1 billion.
As could be expected, there was plenty of reaction and speculation surrounding the rumor. Go Daddy gave the “not commenting on rumors” type of response, while not outright denying it. As of the end of the year, of course, nothing specific had occurred to validate the rumors.
Shortly after appointing Bob Newman its senior vice president and Utah general manager, hosting provider ViaWest announced that it had acquired the data center properties of Consonus in Utah. And in December it acquired the Utah-based colocation firm SingleEdge.
Following the acquisitions, ViaWest now operates 20 data centers in a five-state area that includes Colorado, Texas, Utah, Nevada and Oregon.
In November, IT services firm Cbeyond announced that it had acquired the assets of hosting and cloud provider MaximumASP, along with its affiliated companies, in a deal worth about $40 million. MaximumASP, and the affiliated Aretta Communications, provide cloud services targeting small and medium-sized businesses across the US.
According to Cbeyond, the acquisition benefits the company in terms of its potential to extend the company’s services to new geographic markets, and presents opportunities via the acquired platform.
On the very same day as the MaximumASP deal, US telecommunications provider Windstream Communications announced that it had entered into an agreement with private equity firm ABRY Partners to acquire data center and managed hosting provider Hosted Solutions for $310 million.
Windstream said the deal will add to its data center business through Hosted Solutions’ five facilities. ABRY acquired the company in 2008 for $140 million.
Later in November, managed and cloud hosting firm Layered Tech announced that it had acquired GSI Hosting, a smaller managed hosting company with a specialized expertise in the security and compliance space. In an interview with the WHIR, Layered Tech CEO Jack Finlayson said the acquisition was strategic and technology focused, and centered around the idea of bringing on board GSI’s expertise and technical sophistication associated with security.
And in December, after more than a year of intense focus on the cloud computing space, managed hosting provider Rackspace announced that it had acquired cloud server management firm Cloudkick, whose tools can be used to manage instances within the Rackspace cloud.
In an email interview with the WHIR, Rackspace’s Mark Interrante discussed the Cloudkick deal in some detail, describing some of the specifics around Rackspace’s plans for the company.