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.