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INAP Acquires SingleHop Cloud Hosting for 7X EBITDA Valuation

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Peter D. Aquino
Peter D. Aquino

Internap (INAP) has acquired SingleHop for $132 million in cash -- a valuation of roughly 7 times annual EBITDA (earnings before interest, taxes, depreciation and amortization) after synergies kick in. The deal essentially combines two major IT service providers that offer colocation, managed, cloud and network services.

The valuation is typical for a managed services provider (MSP) but low for a cloud services provider (CSP), which often benefit from SaaS-related intellectual property (IP). SingleHop focuses on managed hosting and infrastructure as a service (IaaS), which should align well with Internap's existing colocation and cloud services. The tuck-in acquisition builds upon a turnaround strategy hatched in 2016.

INAP President and CEO Peter D. Aquino said in a prepared statement: “The INAP turnaround strategy includes restoring top-line organic revenue growth while leveraging smart tuck-in acquisitions to accelerate that growth." Aquino says the turnaround strategy is progressing faster than planned, with the company delivering a "positive outlook" for 4Q 2017.

INAP says the combined companies will benefit from automated systems, a single pane of glass for all services, and a combined customer base of 10,000 organizations (3,000 from SingleHop; 7,000 from INAP).

INAP Acquires SingleHop: Scaling the Talent

Corey Needles
Zak Boca

SingleHop CEO Zak Boca will join INAP at chief marketing officer. Also, it sounds like the SingleHop team will merge into INAP USA's managed hosting and services team, which is led by VP Jennifer Curry.

"Jen acquires an all-star team to attack opportunities that historically may have been challenging for either company to score on its own due to lack of product or size," asserts Corey Needles, senior VP and general manager, INAP USA. "Together, we are much stronger and excited about our growth potential in managed hosting and services as a value-added service to our data center business.”

INAP: Recent Cloud Services & Colocation Revenue

Although INAP sounds upbeat about its fourth quarter prospects, the company's third quarter results -- shared in November 2017 -- showed just how difficult business has been in recent years.

Indeed, Q3 revenue was $68.9 million -- down 6.8 percent vs. Q3 2016. Both colocation revenue ($51.3 million in Q3) and cloud revenue ($17.6 million in Q3) decreased in the period, down 6.6 percent and 7.3 percent, respectively.

Additional insights from Joe Panettieri.