Hosting M&A Market Overview

August 8th, 2011Updated

Hillary Stiff, Managing DirectorCheval Capital, Inc.

• Buyers tend to be existing players looking for simplicity and revenue

• Quality gets a premium• Migration deals get priced on buyer cash flow after migration – Shared Avg: 0.8-1.2x, higher on quality of ops, growth & size– Dedicated Avg: 0.7-0.8x, harder to migrate, lower ROI

• Non-migration get priced on existing cash flow and can have a large range (2-10x EBITDA)

Cheval M&A Market Overview

• Lots of buyers for shared and VPS in all sizes• Solid demand for medium to large dedicated customer bases

at good ARPU. Smaller bases and lower ARPU’s can be difficult.

• Strong demand for medium to larger data centers but smaller facilities can be difficult

• Pockets of demand for domain and registrars• Buyers driven by cost & difficulty of organic growth

M&A Market - Buyers

• Seller pool has increased from recent lows but still fewer sellers than buyers

• Prices aren’t high enough to drive owners to sell • Strong buyer to seller ratio has helped keep prices up• Exceptions: adult hosters, low ARPU hosters and hosters with

higher churn rates. All appear to have more sellers than buyers

M&A Market - Sellers