Windstream Makes Hosting Splash in Private Equity Waves

Nov. 9.10 | About: Windstream Holdings, (WIN)

By Ben Kolada

Windstream Communications (NASDAQ:WIN) bought into business services once again, this time picking up managed hosting, colocation and cloud computing provider Hosted Solutions. The deal is the first hosting play for Windstream, and shows that private equity buyers aren’t the only ones shopping in the sector.

Windstream is paying $310m in cash for Hosted Solutions, which posted $52m in trailing sales. The deal values Hosted Solutions at 12.7x its trailing EBITDA, and more than double the price that ABRY Partners paid for the company in April 2008. Hosted Solutions employs 125, and Windstream initially plans to retain the majority of those employees, though we expect there will be some corporate turnover as part of the integration.

Although telcos have gone shopping for colocation and hosting companies this year (with the most notable deal being CyrusOne’s sale to Cincinnati Bell), private equity firms have dominated the headlines. We recorded 10 hosting and colocation deals this year with deal values of at least $100m. Of this group, half of the targets went to private equity buyers, and four of those deals involved the target company simply jumping from one PE portfolio to another. Further, buyout shops, including firms both in the US and abroad, accounted for nearly half (46%) of the total spending for these 10 deals.

Top 10 hosting and colocation deals of 2010:

Buyer category Number of acquisitions Percent of total spending
Private equity 5 46%
Hosting/colocation 3 32%
Telecommunications 2 22%
Total spending $3.8bn
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Source: The 451 M&A KnowledgeBase