The coronavirus pandemic has all but halted a lot of business activity, but today comes news of a deal that underscores how M&A is still happening in some sectors despite (not because of) everything else going on. One.com — the big hosting provider in Europe with around 1.5 million customers, itself acquired just over a year ago by PE firm Cinven — has acquired Hostnet, a smaller Netherlands-based competitor with about 210,000 customers.
Financial terms of the deal are not being disclosed but a spokesperson for One.com said that it includes all of Hostnet’s existing business — which includes management of 810,000 domain names and 85,000 websites; domain registration, web hosting and SaaS applications services; and managed and virtual private services — and its existing employees.
The spokesperson added that the deal has been in the works for several weeks and closed in the last couple of weeks, with the teams “working through the coronavirus pandemic” to finalise it.
“We are pleased to announce the acquisition of Hostnet given its focus on operational excellence and high brand awareness,” said Stephan Wolfram, Group CEO of One.com, in a statement. “As a result of this transaction, we are now a leading operator in the Dutch hosting market that is core to the development of our business strategy. We look forward to working with the team at Hostnet and significantly enhancing our European presence and product range for our customers.”
You might wonder if Hostnet and One.com are being impacted by the pandemic — specifically, whether the fact that both count small businesses, which have been some of the hardest-hit in terms of operations, as a primary customer base, and whether that is impacting their own bottom line or leading to payment delinquency. The spokesperson said that this was not a factor in this deal or in the financial terms.
There is some data to support that: the consolidation of multiple smaller hosting providers has been a theme for a while now, with companies looking for more economies of scale.
“Hostnet is a highly regarded player in the hosting market with capabilities, awareness and products that will contribute to further accelerate the development of one.com’s business,” Harold Douwes, founder and CEO of Hostnet, said in a statement. “Within the consolidating hosting market, it was important for Hostnet to connect with a strong partner. We found it in one.com, an ambitious party with a lot of knowledge and experience. This offers plenty of possibilities and opportunities for the future.”
As we have pointed out before, web hosting and related services represent a significant, if not wildly evolving, part of the tech landscape. So, for as long as businesses and consumers continue to use the web — and, as everyone is staying at home, we have had even more web traffic of late than ever — there will be a need for companies who sell and host domain names and provide various cloud services around that.
But since there is a lot of competition in this space, that means prices are competitive to customers, and that, in turn, also means that margins, particularly in the resale of SaaS tools, are low. In other words, we’re likely to see more consolidation in this area over time.