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Web.com for Sale? Potential Buyers Could Be Private Equity Firms, Hosting Providers

Web.com Group Inc., which offers small business website hosting and marketing services, is attracting takeover interest from private equity firms, according to Reuters.

The report said:

“Web.com has engaged in early-stage talks with private equity firms in response to approaches about a potential leveraged buyout, the sources said. The company is not actively soliciting offers and there is no certainty that any deal will occur, the sources added.”

Web.com’s valuation was nearly $1.1 billion as of  May 26, 2016. For its Q1 2017 results, announced May 4:

  • Total revenue was $185.1 million, compared to $144.8 million for the first quarter of 2016. The year over year increase in revenue was primarily due to a full quarter of Yodle ownership in Q1 2017 vs. Q1 2016, when Yodle was owned for only a portion of the quarter.
  • Adjusted EBITDA was $47.2 million for the first quarter of 2017. If quarterly EBITDA figures remain consistent for 2017, Web.com’s current valuation is roughly 5.7 times annual EBITDA.

Web.com’s total net subscribers were approximately 3.5 million at the end of Q1, up approximately 45,000 from the end of the fourth quarter of 2016.

Potential Web.com Buyers: Pure Speculation

So which companies, if any, would potentially target Web.com for acquisition. Here are some random thoughts…

Giants like GoDaddy certainly come to mind. Already, GoDaddy in 2017 acquired Host Europe Group from Cinven Group.

Private equity firms across North America have also owned hosting providers from time to time.

  • For instance, Novacap acquired Hosting.net in 2013 and still owns the company.
  • Also, Berkeley Capital Group Inc. in May 2017 launched a web hosting provider called Hosting Wrap. Headquartered in the USA, Hosting Wrap is a provider of high quality low cost hosting and domain services to small and medium enterprises, the company claims.
  • Rackspace also is private equity owned, though I think Web.com’s services are too low-end t0 attract buyout interest from Rackspace.
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