Exact financial terms were not disclosed, but the deal involves plenty of Private Equity activity. Rackspace remains owned by Apollo Global Management. As part of the deal, Datapipe's majority owner -- Abry Partners -- will receive equity in Rackspace, the companies revealed.
ChannelE2E is trying to determine if Apollo is taking some money off the table as part of the deal, or if Abry's purchase of Rackspace shares somehow puts money in Rackspace's war chest for more growth.
Both Rackspace and Datapipe have extensive M&A experience. Example deals include:
Still, Rackspace is a business in transition and the company's overall performance has been a mixed bag in recent years.
Rackspace On the Rebound?
Apollo Global Management acquired Rackspace in 2016 and took the company private. The pitch: Rackspace, instead of competing head-on against Microsoft and Amazon, would build managed services for third-party clouds. There's been progress and customer wins. But by early 2017, Rackspace had a CEO change and layoffs.
Now, Rackspace is trying to prove that the company can thrive while providing managed services for third-party clouds like Amazon Web Services, Microsoft Azure and Google Cloud Platform. The company also wants to manage private clouds and on-premises systems for customers.
Datapipe, based in Jersey City, N.J., fills many of those private cloud voids. Indeed, Datapipe is a "growing and profitable business," the company says, with 825 employees and 29 data centers in nine countries Key customers include Johnson & Johnson, McDonalds and Rubbermaid.
How Datapipe Potentially Bolsters Rackspace
Rackspace says Datapipe's business has five key areas of strength:
- Government Expertise: Datapipe's key customers include major government agencies -- such as the U.S. Departments of Defense, Energy, and Treasury, as well as the U.K. Cabinet Office, Ministry of Justice, and Department of Transport, the company says.
- Consulting and Automation: Professional services, software and tooling that will help better serve enterprise customers, Rackspace asserts.
- Geographic Diversity: Data centers and offices in key markets where Rackspace today has little or no presence, including the West Coast of the U.S., Brazil, mainland China, and Russia, the company noted.
- Multiple Models: Traditional colocation services across four continents, to reduce cost and risk for customers moving applications out of their corporate data centers, Rackspace says.
- China Penetration: Managed services on the Alibaba Cloud (the largest in China)
Those offerings have synergies with Rackspace's existing services, the company says, including know-how across private clouds, public clouds and deep relationships with Amazon Web Services, Microsoft, Oracle, SAP, VMware, the companies said.
Praise From the CEOs
Rackspace CEO Joe Eazor and Datapipe CEO Robb Allen, predictably, both praised their M&A deal in prepared statements.
“Our customers are looking for help as they spread their applications across public and private clouds, managed hosting, and colocation, depending on the blend of performance, agility, control, security, and cost-efficiency they’re seeking. With the acquisition of Datapipe, we’re very pleased to expand the multi-cloud managed services we provide our customers, while also opening doors to new opportunities across the globe.”
“We are very proud of the business we have built and the innovations and successful customer outcomes we have been recognized for, and the future of Datapipe will be even brighter in combination with Rackspace. Customers need guidance using public cloud infrastructure from Alibaba Cloud, Amazon Web Services, Google Cloud Platform, and Microsoft Azure. They also need help navigating the use of private clouds, managed hosting and colocation solutions, often in combination, as they move critical applications out of their corporate data centers. The combination of complementary capabilities and resources from both of our companies will create the world’s leading provider of multi-cloud managed services.”
Pending regulatory approvals, Rackspace expects to complete the Datapipe buyout in Q4 2017. ChannelE2E is checking to see if or how Allen will be involved in the combined company over the long haul.