Hosting and Managed Services Introduction

Market Commentary

  • Continued consolidation and investment activity across managed hosting and services with more than fifteen significant transactions in the past 6 months.
    • Buoyant M&A activity in the mass hosting space, with a number of major players being recently acquired. Further consolidation is expected in the near future.
  • Growth in cloud managed services driven by the rising adoption of big data, with cloud-based security services expected to experience particularly high growth on account of the surge in adoption of mobile data security services.
  • The digitization of specialised processes, for example through automation and relocation to the cloud, as well as the use of machine learning and robotics, have been driving significant growth across the IT services industry.
  • In a context of distressed equity markets (the NASDAQ and S&P500 falling by c. 17% and 14% respectively in the last quarter), public market valuations are lower across the board. That said, the global IT services sector has been relatively resilient.
  • However, private markets valuations continued to reach new heights.

Hosting and Managed Services Taxonomy

Web Hosting

Refers to a service in which a vendor offers the housing of business-to-business or business-to-consumer e-commerce websites via vendor-owned shared or dedicated servers and applications for enterprises at the provider-controlled facilities

Selected Market Participants

screen_shot_2019-01-14_at_5.08.57_pm.png

Managed Services

Refers to the delivery of network, application, system and e-management services across a network to multiple enterprises, using a “pay as you go” pricing model

Selected Market Participants

screen_shot_2019-01-14_at_5.10.10_pm.png

IT Outsourcing

Refers to the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes

Selected Global Market Participants

screen_shot_2019-01-14_at_5.11.00_pm.png

Selected Recent HW Hosting and Managed Services Transactions

screen_shot_2019-01-14_at_5.11.48_pm.pngProvider of mass hosting services for SMEs, including web hosting, domains, e-commerce and application solutions with leading positions in Belgium and Denmark and a growing presence in the Netherlands, Sweden and Switzerland

 

 

 

screen_shot_2019-01-14_at_5.12.20_pm.pngProvider of services allowing SMEs to move their IT infrastructure and operations into the cloud, as well as providing end user support and consulting as part of a full-service IT offering

 

 

 

screen_shot_2019-01-14_at_5.12.45_pm.pngProvider of web domains, shared web hosting and value-added services with leading positions in Sweden and the Czech Republic, and presence in Norway, Serbia, Slovakia, Spain, Netherlands, Germany and the UK

 

 

 

screen_shot_2019-01-14_at_5.13.16_pm.pngProvider of managed technology services with national scale in the US and the capability to design, deploy and support technology solutions from cable to cloud

 

 

 

screen_shot_2019-01-14_at_5.13.40_pm.pngProvider of SME focused hosting and cloud solutions, including domains website hosting, email for smaller customers and managed servers and applications for larger customer

 

 

 

screen_shot_2019-01-14_at_5.14.01_pm.png

Provider of managed hosting and cloud solutions specialised in managed cloud hosting, desktop-as-a-service, security and connectivity

Market Observations

screen_shot_2019-01-24_at_4.18.42_pm.png

screen_shot_2019-01-24_at_4.19.47_pm.png

screen_shot_2019-01-24_at_4.21.41_pm.png

screen_shot_2019-01-24_at_4.24.00_pm.png

screen_shot_2019-01-24_at_4.24.49_pm.png

*Group weighted average stock price performance over the past year based on market capitalisations

Select Hosting and Managed Services M&A Transactions

screen_shot_2019-01-16_at_10.38.18_am.pngHg’s Acquisition of Combell2,3

• Belgium-based provider of mass hosting services for SMEs across Europe
• Combell has over 800,000 SME and SoHo customers and is a one-stop partner for web hosting, domains, e-commerce and application solutions
• Hg’s deep sector expertise and track record will help Combell to continue adding selective M&A on its platform while further developing its applications offering

screen_shot_2019-01-16_at_10.40.08_am.pngComputacenter’s Acquisition of FusionStorm2

• US-based provider of IT consulting, technology solutions and cloud/managed services to enterprises
• FusionStorm has extensive expertise in the design and implementation of web-scale data center environments, and the logistics capabilities for large-scale, multisite technology rollouts
• This complementary and incremental acquisition enables Computacenter to offer a full range of services in the US, consistent with the Group's offerings in Europe

screen_shot_2019-01-16_at_10.41.12_am.pngInflexion’s Minority Investment in UKFast2

•UK-based provider of cloud and hosting platforms for businesses and government organisations to outsource critical IT infrastructure
•UKFast has a customer base of 5,500 UK SME clients and 200 mid-sized companies, which are served by UKFast’s 350 employees
•Inflexion is backing UKFast to further tap into the growing IT infrastructure services market 

 

screen_shot_2019-01-16_at_10.42.21_am.pngCinven’s Acquisition of One.com2,3

•Denmark-based provider of domain names and web hosting services to SME and SoHo customers
•One.com has 270 employees and serves more than 1 million customers, with a focus on Northern Europe
•Cinven will focus on accelerating One.com’s organic growth and further consolidating the Nordics

 

screen_shot_2019-01-16_at_10.43.26_am.pngNEC’s Acquisition of KMD2

•Denmark-based specialist in the integration of IT and network technologies
•KMD mainly provides software and IT services in Denmark through business models that generate profit continuously on a recurring basis, such as SaaS offerings
•This acquisition will accelerate NEC's global safety business, which it has positioned as a growth engine in its three-year medium-term management plan

 

IT & Tech-Enabled Services – Trading Comparables

 

hosting1.png

hosting2.png

 

IT & Tech-Enabled Services – Transaction Activity

ma1.png

ma2.png

Note: convertion to USD based on FX rate as of announcement date

IT & Tech-Enabled Services – Representative Landscape

Representative IT & Tech-Enabled Services Providers

screen_shot_2019-01-16_at_10.53.26_am.png

Sources
1.Factset; market data as of 31 December 2018.
2.Merger Market.
3.HW proprietary transaction information.

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: hwgermany@harriswilliams.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. awaited). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.