Tag: KKR

International activity helps push cloud infrastructure M&A to new heights

Ben Kolada

Contact: Ben Kolada

Cloud infrastructure M&A activity set several records in the just-closed second quarter, due in large part to a rise in international dealmaking. We’ve been noticing a steady uptick in international M&A activity lately, as both foreign strategic acquirers and private equity (PE) firms look to consolidate fragmented sectors in their own backyard and abroad. While we noticed a diversity of deal flow in the first quarter, with companies being targeted in nine different countries, the majority of international M&A in Q2 focused on Canada- and UK-based companies. Targets based in those two countries accounted for about 70% of all foreign acquisitions.

For international deal flow, the most visible theme was consolidation in the Web hosting sectors in the UK. Iomart Group, Othello Technology Systems and Lloyds Development Capital each announced Web hosting deals in Q2. In fact, Web hosters accounted for all but one of the deals targeting a UK-based company. This news should be of particular interest to domain name registration and Web hosting giant The Go Daddy Group, which recently took an undisclosed investment by a group of private equity firms led by KKR. Go Daddy will use the newfound capital for international expansion, as well as product development, and we wouldn’t be surprised if it looked to M&A to grow its nascent European footprint.

International cloud infrastructure M&A

Period Acquisitions of non-US targets
Q2 2011 16
Q1 2011 11
Q4 2010 11
Q3 2010 6

Source: The 451 M&A KnowledgeBase

Going, going, gone: Go Daddy sells to KKR

Ben Kolada

After canceling a proposed IPO in 2006 and reportedly being on the block since late last year, The Go Daddy Group is now selling an undisclosed stake to private equity firms KKR, Silver Lake Partners and Technology Crossover Ventures. The deal is believed to be among the largest private equity investments in the Internet infrastructure industry, and continues an emerging trend of buyout shops acquiring mass-market hosters and repositioning them toward higher-end services.

Reportedly worth $2.25bn, the transaction lands squarely in second place among the largest PE investments in this industry. We note that the first-place prize goes to a group led by Silver Lake (and including KKR) in the $11.3bn take private of SunGard Data Systems in 2005. Silver Lake’s interest in the industry is increasing – the Go Daddy deal comes less than a year after the firm took a minority stake in a similar hoster, Brazil-based LocaWeb.

We expect that KKR and the other investors will focus on international expansion as well as investment in cloud services. Silver Lake’s stake in LocaWeb could be particularly useful. The Latin American hosting and colocation markets are seeing increasing interest (heavyweights Savvis and Equinix have each announced plans for the region). We wouldn’t be surprised if LocaWeb and Go Daddy ultimately became partners. Further, we’ve noticed that PE firms tend to refocus their mass-market hosting companies on more specialized, higher-end cloud services. LocaWeb’s cloud services could provide additional expansion opportunities for Go Daddy, which recently began a limited launch of its own cloud product. We’ll have a full report on the Go Daddy deal in tonight’s Daily 451.