HostingCon 2011 - Overview of M&A activity in the web hosting space. Hillary Stiff & Frank Stiff of Cheval Capital, Inc.

1. Hosting M&A Market Overview
Hillary Stiff, Managing Director
Cheval Capital, Inc.
August 8th, 2011
Updated

2. Cheval M&A Market Overview
• Buyers tend to be existing players looking for simplicity and
revenue
• Quality gets a premium
• Migration deals get priced on buyer cash flow after migration
– Shared Avg: 0.8-1.2x, higher on quality of ops, growth & size
– Dedicated Avg: 0.7-0.8x, harder to migrate, lower ROI
• Non-migration get priced on existing cash flow and can have a
large range (2-10x EBITDA)

3. M&A Market - Buyers
• Lots of buyers for shared and VPS in all sizes
• Solid demand for medium to large dedicated customer bases
at good ARPU. Smaller bases and lower ARPU’s can be
difficult.
• Strong demand for medium to larger data centers but smaller
facilities can be difficult
• Pockets of demand for domain and registrars
• Buyers driven by cost & difficulty of organic growth

4. M&A Market - Sellers
• Seller pool has increased from recent lows but still fewer
sellers than buyers
• Prices aren’t high enough to drive owners to sell
• Strong buyer to seller ratio has helped keep prices up
• Exceptions: adult hosters, low ARPU hosters and hosters with
higher churn rates. All appear to have more sellers than
buyers