Rackspace SEC Filing Triggers MSP Takeover Speculation

Rackspace Technology‘s board of directors has approved a new “Executive Change in Control Severance Plan,” sparking speculation that the Top 250 Public Cloud MSP could be a potential acquisition target. The new Rackspace executive plan surfaced in March 18 filing with the SEC.

According to the filing:

“The Plan was adopted to provide standardized severance benefits to current and future Participants in the event of a Qualifying Termination following a Change in Control and, assuming the eligible executive officer elects to participate in the Plan, supersedes any pre-existing severance benefits to which the Participants were previously entitled, including those provided under employment agreements with the Company’s Chief Executive Officer, Chief Financial Officer and other named executive officers.”

The plan includes a range of salary, target bonus, health insurance, outplacement and accelerated vesting perks for certain Rackspace executives if the MSP is acquired.

Such plans sometimes indicate that a company may pursue an exit, or has been receiving inbound M&A inquiries. But there’s no guarantee such activity is brewing at the MSP.

A Rackspace representative told Seeking Alpha in an email that the company doesn’t have anything to add to filing from March 18 and it doesn’t comment on speculation.

Rackspace: Existing and Potential Investors

Rackspace, backed by private equity firm Apollo Global Management, is a very successful multi-cloud MSP focused on AWS, Microsoft AzureGoogle Cloud Platform and more. The company ranks among the world’s Top 250 Public Cloud MSPs, according to ChannelE2E research.

Still, Rackspace held an underwhelming IPO (initial public offering, $RXT) in mid-2020. Investors in recent months appeared underwhelmed by the company’s debt load and dependence on third-party clouds to generate recurring managed services revenues.

Rumors about Amazon Web Services (AWS) potentially investing in Rackspace surfaced in August 2020, but no such investment has surfaced.

MSP Mergers and Acquisitions: M&A List

Meanwhile, M&A activity across the MSP market remains very strong. ChannelE2E has tracked more than 180 M&A deals — most involving MSPs and IT service providers — so far in 2021.

 

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