Have you ever bought another web hosting company?

Artashes

Artashes

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Have you ever acquired another web hosting company? If Yes, how was the experience for you? What did you learn in the process? What did the ROI on acquired asset look like? Most importantly, was the deal worth it at the end?

If you can share a bit more information in the process, I think it will be both interesting and beneficial to hear. For example, the size of the company you acquired (whether in clients or servers), what was the economics of the deal, what did the customer churn look like, etc.

No need to disclose any private information that doesn't serve the purpose of the use case.
 
I'm curious about this also, looking at starting to acquire a couple small hosting providers (mainly looking to take over hosting operations of web design companies, so they can focus on web design).
 
I've purchased other companies but only acquired their customers in the purchase.

In two of them, they were domain name registration purchases. Essentially, the domains under another company were transferred to our reseller account at eNom. We added the users to our WHMCS for recurring billing, and then notified the user when they were up for renewal.

Our markup on domains was $0.05 - so that's not going to win anything, but several of the users did sign up for hosting, and a few of them purchasing SSL Certificates, etc. The purchase price in one was 100% free - they had already sold their hosting but were left holding about 50 domains for clients, so we took them over. The other purchase was for just over 100 domains and we paid $1 per domain. Again, no profit there, but it was used as a purchased marketing channel which we then upsold hosting and other services.

We purchased one other smaller hosting company (less than 100 clients) which was hosting and domains. They were a web design company that also offered hosting. They were getting out of hosting and focusing only on web design. The purchase price was 6 months revenue for any customer older than 6 months and 3 months revenue for any customer newer than 6 months.

So.. for example (and these were not the numbers or prices, but used for illustration purposes;
10 customers signed on less than 1 month ago - 10 x $10 = $100 x 3 months = $300
20 customers singed on 4 months ago - 20 x $10 = $200 x 3 months = $600
20 customers signed on 6+ moths ago - 20 x $10 = $700 x 6 months = $1200
50 customers signed on 1+ years ago - 50 x $10 = $500 x 6 months = $3000
Total price: 100 customers for $5100

Many years ago the standard was 12 months revenue, heck, back in the early 2000's you could get 5-time annual revenue on a sale. 1 and 1 was purchasing like crazy back then :)

I've no idea what the going rates are in 2021, but I would assume it's still in the 6-month range.

For us, we were fortunate enough to find companies that wanted/needed to sell, so pricing was favorable and almost no negotiation. We didn't need much in terms of digging into the books etc as we were strictly purchasing the users and their hosting. We then worked to move the hosting accounts to our servers, updated the DNS from the old host, coordinated with customers, etc and we were off. Within 3 months, all clients pointing to the old DNS had moved to our DNS and we were able to shut down the old DNS name.
 
6 months revenue sounds like an incredible opportunity in an industry that requires so much pain to attract even one client to sign up. I even think some companies pay out more in affiliate commissions.

It also sounds like you exercised a lot of patience in your acquisition strategy by not proactively going after companies, rather waiting for good opportunities to come by, thus creating more favourable conditions for deals.
 
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