Mergers and Acquisitions - The Current MO
"Mergers and Acquisitions - The Current MO
Stocks are yo-yoing, jobless rates are still climbing, and the
word ""recession"" is getting thrown around more than a ball at
a Beach Boys' concert. Despite the spurts of hard times in the
technology industry, it remains imperative for companies to plan
for the future; and judging from recent news, the future is now.
HostIndex.com has spoken to several people in the know who have
said the amalgamation of hosting companies will be the norm; in
order to survive, hosting companies will need to pair up or be
left alone to suffer for example one that has succeeded is
http://www.weblinkhosting.com.
Software, professional services and managed service provider,
divine inc. announced it will acquire Data Return, a leading
managed hosting services provider. The stock-for-stock deal is
valued at about $33 million dollars. Chicago, IL-based divine
said the deal means it will achieve profitability by the second
quarter of 2002.
And that's just one of the examples.
Express Technology, which already operates two hosting brands,
announced it had purchased ""certain assets of Digital
Chainsaw"", and will be bringing the company and its 6000
customers into the Express Technology family. Express currently
parents HalfPriceHosting, a Windows-only hosting company, as
well as CFXHosting, which deals strictly with those wishing to
use ColdFusion applications.
In these tough economic times, companies can be purchased for
bargain prices compared to the inflated markets of yesteryear.
For hosting companies looking to expand into markets they
currently do not serve, acquisitions are a very viable
alternative to starting from scratch.
In late October, Interland announced it had acquired the small
business-focused shared and unmanaged dedicated retail Web
hosting business of Interliant. Though the terms of the deal
were never disclosed, it does solidify the onward-focus that
while today, hosting companies seem to be a dime a dozen,
tomorrow, they could be pairing up in an effort to stay alive,
and profitable. In 2002, Interland also picked up several more
companies including CommuniTech.Net and Dialtone Internet.
""On October 29, Interland announced that we would acquire the
small-business focused shared and unmanaged dedicated customer
accounts of Interliant, Inc.,"" Joel J. Kocher, Interland's
chairman and CEO, said.
""The transaction includes only the purchase of accounts and
does not include the purchase of data center infrastructure.
This is a critical point. I'll explain why.
The Web hosting industry currently is undergoing a major
shakeout and consolidation. This can be attributed to the
unnatural level of capital infusion during the Internet boom,
which resulted in too many players and an overcapacity of
infrastructure and data center space. Many Web hosts now are
saddled with debt at a time when funds are no longer flowing
from the capital markets.
Now, Interland is seizing this opportunity. We have an
efficiency-driven business plan and we can leverage our strong
cash position to acquire customer accounts as other players exit
the business. And, by acquiring only customer accounts and the
associated revenue, we can more rapidly achieve the scale and
operating efficiencies needed to accelerate our drive to cash
flow profitability. The acquisition should be immediately
accretive to our gross margins as we quickly integrate these
customers into our existing operations."""