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Inabox Acquires Hostworks MSP for 2X EBITDA Valuation

Inabox Group has acquired Hostworks for AU$7 million from BAI Communications. The deal’s valuation is only about 2X expected annual EBITDA during Inabox’s first full year of owning Hostworks. Inabox paid AU$5 million up front, with another AU$2 million as an interest-bearing vendor loan repayable in FY18, issued by BAI.

Hostworks offers managed cloud hosting, colocation and digital media solutions. The company’s customer relationships appear very sticky. Roughly 90 percent of Hostworks’ revenue is recurring. And the average customer tenure is a frothy 8.2 years.

Hostworks, which launched in 1999, has about 80 employees and a 24/7 network operations center in Adelaide and a corporate office in Sydney, Australia. The company has strong relationships with Microsoft Azure, Amazon Web Services, IBM Cloud (formerly SoftLayer) and Google Cloud Platform. Hostworks offers end-customers a single pane of glass through which all of those cloud platforms and services are managed.

The deal bolsters Inabox’s vision to be a “leading managed communications, cloud and IT services provider for SMEs and corporates as the demand for cloud-based services continues to grow,” said Inabox CEO Damian Kay. “For most companies investment into next generation products and services remains necessary to stay at the forefront of an emerging market.”

Inabox supplies wholesale ICT (fixed, mobile, data) and cloud products and associated services, including billing and technical and customer support, to retail service providers around Australia through wholesale brands, Telcoinabox, iVox and Neural Networks. Inabox also enables mass-market consumer brands to enter the telecommunications market by leveraging its network and systems capabilities.

Inabox also provides nationwide IT software, hardware and services through its Anittel brand — a familiar name for anyone who knows MSP veteran Tim Brewer, now a consultant and venture advisor.

Inabox’s Kay further describes the Hostworks deal and potential synergies in this interview. Dig into that interview and you’ll see how well the Anittel acquisition has performed as well.


-channele2e-top100-2017Complete M&A Coverage: Track all VAR, MSP and CSP mergers and acquisitions by visiting the ChannelE2E Milestones section daily. Also, check out ChannelE2E’s Top 100 Mergers & Acquisitions across the IT channel, 2017 edition.

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2 Comments

Comments

    kirill bensonoff:

    Any idea why the multiple is so low, anyone? Hostworks seems to be offering the right mix of subscription cloud services, and potentially software.

    interested to see what others think.

      Joe Panettieri:

      It may involve the fact that the EBITDA is based on future earnings rather than current EBITDA stats, which are likely lower. And by extension, the multiple on those current stats would be hire. It sounds like Inabox expects lots of cost synergies from the deal — hence a quick ramp-up in future EBITDA…
      -jp

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