.entry-title { text-align: left !important; }

Cheval Capital Celebrates Our 400th Transaction!

We're excited to announce that Cheval Capital recently celebrated our 400th transaction! Since we first entered the space in the late 1990's Hillary & Frank have helped businesses in cloud, hosting, and IAAS industries navigate the tricky waters of mergers and acquisitions, financings and corporate finance.

The 400-transaction benchmark also marks the 25th transaction we've successfully closed so far in 2017! Over the last few months we've completed transactions with companies in Ireland, Australia, New Zealand, China, Israel, Canada as well as the US.

Our extensive industry expertise & network have enabled us to help our clients get maximum value from the unique aspects of their business regardless of location.

Here's what Hillary Stiff had to say about passing the 400 mark, “Over the last few years our business has grown as providers have struggled with organic growth and have turned to acquisitions instead. This acquisition demand has supported prices and led to an active transaction market."

Click on the links above to get more information about Cheval or feel free to contact us with any questions you have. We're always happy to help.
 

How To Buy An Online Business With An SBA Loan – The Process

How To Buy An Online Business With An SBA Loan – The Process

We'd like to thank Mark Daoust, owner of Quiet Light Brokerage, for giving us permission to reprint his blog post on SBA loans, part 2 of which is below. Mark is the go-to-guy for the purchase or sale of online eCommerce businesses and if you have an interest in that space, we encourage you to contact him at inquiries@quietlightbrokerage.com.

The US Government's Small Business Administration lends up to $5 million that businesses that meet certain criteria. The post below talks about the general requirements of an SBA loan while part 2 will get into the process of applying for an SBA loan.

How To Buy An Online Business With An SBA Loan - The Requirements

How To Buy An Online Business With An SBA Loan - The Requirements

We'd like to thank Mark Daoust, owner of Quiet Light Brokerage, for giving us permission to reprint his blog post on SBA loans, part 1 of which is below.  Mark is the go-to-guy for the purchase or sale of online eCommerce businesses and if you have an interest in that space, we encourage you to contact him at inquiries@quietlightbrokerage.com.

The US Government's Small Business Administration lends up to $5 million that businesses that meet certain criteria. The post below talks about the general requriements of an SBA loan while part 2 will get into the process of applying for an SBA loan.

 

Hillary Stiff's HostingCon 2017 Valuation Slides

Below is a link to Hillary Stiff's slides from HostingCon 2017 on current valuations in the hosting and cloud markets. Please feel free to send over any questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell any stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale or purchase of a business or making other financial decisions.

VALUATION OF PUBLIC HOSTING COMPANIES - March 22, 2017

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that also affect their valuations. (All data was taken from publicly available financial information and please see this post for how we calculate Enterprise Value.)  If you wish to get a sense for changes to valuations over time, here is a link to some of our past valuation summaries.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Author: Hillary Stiff is Managing Director of Cheval Capital. She has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including The Endurance International Group and Web.Com among many others. She has helped complete over 370 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale.

Blog Index & Twitter Feed

Conferences!

Here is our conference schedule for the next few months.

  • World Hosting Days – March 27-30, 2017. Rust, Germany
  • HostingCon – April 3-6, 2017. Los Angeles, California
    • Hosting Feud with Drinks Game Show on April 3rd at 5pm.
    • Hillary Stiff is speaking on the current climate and trends in M&A on April 5th.
  • Pressnomics – April 7, 2017. Tempe, Arizona

Please let us know if you will be attending any of these as we'd enjoy meeting up!

Better Deals Can Be Made With Kindness & Professionalism

Better Deals Can Be Made With Kindness & Professionalism

We'd like to thank Mark Daoust, owner of Quiet Light Brokerage, for giving us permission to reprint the blog post below.  Mark is the go-to-guy for the purchase or sale of online eCommerce businesses and if you have an interest in that space, we encourage you to contact him at inquiries@quietlightbrokerage.com.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell any stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Better Deals Can Be Made With Kindness & Professionalism

In Hollywood movies, the big-shot businessman is always sitting in their high-rise office negotiating big-dollar deals and barking down the phone. It is easy to look at that and think this is the way it should be done in real life.

Cheval Year End Letter - 2016

Happy New Year

We want to thank our clients and colleagues for a record breaking 2016.  M&A activity in cloud, hosting and related business segments was at high levels during 2016 and we were fortunate to complete 24 M&A and 35 IPv4 block transactions.  The M&A transactions included a broad mix of sizes and types of hosting businesses and we have now completed over 370 internet services and related transactions since we first got started in the space in the mid-1990s.  

As we have done for the last few years at this time, we’d like to take a moment to highlight a few of the industry trends that caught our eye during 2016:

Industry growth in dollar terms continues to accelerate - *: The Hosting and Cloud business had another solid year in 2016. While the industry’s growth rate declined to an estimated 18.8% rate in 2016 from 20.2% in 2015, the industry’s growth in total dollars accelerated from an estimated $12.1B increase in 2015 to an estimated $13.5B increase in 2016. We believe the continued increases in dollar growth to be a more significant predictor of industry health than percentage growth at this time, particularly in the current stable/declining price environment. These increases highlight the continued expansion of demand for cloud, hosting and related services. 451 Group’s projections indicate growth in dollar terms is likely to continue to accelerate over the next few years.

As in previous years, growth across the industry continues to be uneven. This year we’ve worked with hosters growing at 30+% per year and hosters that are shrinking. We expect this unevenness to continue.

(* - 451 Research, Market Monitor 2016.)

Divergence of brains & brawn: We’ve seen increasing numbers of service providers offering service on others’ infrastructure. While not uncommon in the past, we’re now seeing it on a larger scale and among providers of higher end and more specialized services. Our expectation is that as the hyper-scalers continue to reduce prices and expand service, we will see more of these infrastructure-lite providers. We believe this separation is due in part to a declining rate of return on commodity infrastructure and in part from new opportunities the hyperscalers are creating (e.g. support, onboarding, management.)

We also believe that for the smaller providers, selling brains is likely to generate a higher risk adjusted return than commodity computing infrastructure. A key problem however, is that valuation and sale of businesses that sell hours of service like a consulting firm can be more difficult. Companies following this path need to ensure they automate and productize their service.

AWS Lightsail: Amazon Web Services (“AWS”) released a new VPS hosting product in late 2016. While the Lightsail product is not revolutionary or particularly aggressively priced, it does signal AWS’s desire to go after the unmanaged VPS market more seriously. If AWS remains true to form, we can expect price cuts, better hardware and an expanded product/service portfolio down the road. Given their size advantages, they are likely to be a formidable competitor to existing SMB hosters.

Ongoing M&A Trends: Lastly, a number of the M&A trends we highlighted last year appear to be continuing. Rather than repeat ourselves, you may find our 2015 letter https://www.chevalcap.com/blog/2016/1/11/hosting-ma-update of interest.

 

Best wishes for a happy and healthy 2017!

Hillary Stiff & Frank Stiff
Cheval Capital, Inc.

United Internet Acquires Strato from Deutsche Telekom

Continuing the trend of telecom companies divesting hosting and co-location assets, Deutsche Telekom announced last week that it would sell its Strato hosting arm to United Internet for E600mm, approximately 12.4x 2016 EBITDA. For those keeping score, Deutsche Telekom acquired Strato in 2009 for E275MM giving it a compound annual return of about 11.8% (ignoring  intervening cash flows.)

Two other key points; approximately E34mm of the purchase price is subject to the business hitting certain performance targets which may take a little of the price risk out of the deal. Second, United Internet is reporting an expected E20mm p.a. of synergies from integrating the two businesses. Those additional synergies bring the incremental EBITDA margin for United to approximately 54%.

Overall pricing is in the same ballpark as GoDaddy's recent purchase of Host Europe Group.

United Internet's presentation on the purchase can be found here.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Author: Hillary Stiff is Managing Director of Cheval Capital. She has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including NTT/Verio, The Endurance International Group and Web.Com among many others. She has helped complete over 350 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale.

GoDaddy Acquires Host Europe Group

Congratulations to the folks at GoDaddy and Host Europe on their announced transaction.

The purchase price of $1.82 billion (including debt assumption) works out to approximately 13x 2016 EBITDA.  This compares to GoDaddy's estimated public market value of 15-20x EBITDA before the announcement.

Both companies have great management teams and this seems to be a transaction where there is an excellent chance that 2 + 2 > 4.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Author: Hillary Stiff is Managing Director of Cheval Capital. She has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including NTT/Verio, The Endurance International Group and Web.Com among many others. She has helped complete over 350 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale.

Expanding your business through M&A

We recently gave a presentation on M&A at a customer conference for a large Hosting Industry vendor. The slides turned out to be pretty complete so we're reposting!

Please feel free to contact us if you have any questions or comments.

Cheval Capital

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Valuation of Public Hosting Companies - September 28, 2016

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that also affect their valuations. (All data was taken from publicly available financial information and please see this post for how we calculate Enterprise Value.)  If you wish to get a sense for changes to valuations over time, here is a link to some of our past valuation summaries.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Author: Hillary Stiff is Managing Director of Cheval Capital. She has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including NTT/Verio, The Endurance International Group and Web.Com among many others. She has helped complete over 350 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale.

Blog Index & Twitter Feed

VALUATION OF PUBLIC HOSTING COMPANIES - JULY 15, 2016

Summarized below are estimates of the relative valuations of some public companies that have significant hosting operations. Please be aware that a number of these companies have other businesses that also affect their valuations. (All data was taken from publicly available financial information and please see this post for how we calculate Enterprise Value.)  If you wish to get a sense for changes to valuations over time, here is a link to some of our past valuation summaries.

As always, please feel free to contact us if you have any comments, or questions.

Cheval Capital, Inc.

Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.

Author: Hillary Stiff is Managing Director of Cheval Capital. She has been an investment banker and CFO, completing M&A transactions and arranging financing for a number of companies including NTT/Verio, The Endurance International Group and Web.Com among many others. She has helped complete over 320 successful web hosting, ISP and related transactions and distributes a list of hosting and related companies that are for sale.

Blog Index & Twitter Feed

SHARE

HostingCon 2016 Events

We will be in New Orleans at #HostingCon2016 this month (July 24-27th.) HostingCon is a conference and trade show for the web hosting and cloud community and we're looking forward to seeing everyone once again this year! Some of our events include;

Sunday at 5pm is the HostingCon Game Show. Aaron Phillips of #cPanel is hosting a trivia contest and Family Feud game. The winning team gets dinner at Shaya, the James Beard Award winning best restaurant for 2016!

On Monday at 10am, join us for the panel, "How Service Providers Can Raise Money for Business Growth". The focus will be on financing tools available to small to mid-sized companies including options such as SBA financing and leasing.

Tuesday at 9am will be an Acquisition panel with some of the big buyers in the industry focusing on how they evaluate companies and things sellers can do to help their valuations.

Please let us know if you'll be coming as we'd be happy to get together.

Hillary & Frank

 

 

Washington & Encryption

David Snead, co-founder of the Internet Infrastructure Coalition (i2C), and I went to Capitol Hill this past week to lobby on Encryption issues.

The good news was that the Feinstein - Burr legislation was generally thought to be ill-conceived and not going to pass in its current form.  Given the strength of the comments we heard, I got the sense that they had been getting a lot of negative comments on the legislation from different parts of the debate. Unfortunately, the discussions did indicate there was still room for consideration of similarly troublesome legislation in the future.  If you are not up on Feinstein - Burr I recommend this Tech Crunch article.

I think most also recognized that breaking encryption in some manner was not really an option and they wanted to try and find other options to help law enforcement deal with encryption.

In the interesting news camp, there were a number of comments about developing rules to allow the law enforcement, under a valid court order, to hack (or hire hackers to hack) encrypted data. 

The concerning news was that despite making comments about how they recognized that breaking encryption was a bad idea, several commented on the need for both sides to compromise.  How we compromise without breaking encryption is a mystery and a concern that they don't quite get it.

A final note regarding the i2C. These lobbying trips are one of the great perks of being an i2C member and I encourage folks to join the organization and its fight to minimize disruption from ill-conceived government actions.  The current fight on encryption is a hugely important one and I encourage everyone to join in.