Consolidation Continues in Web Hosting Sector with Web4U Acquisition by Miss Group

When clients approach us to sell their company, trust is paramount. They trust that we understand just how difficult this step is for them and that we will reliably guide them through the M&A process, with honesty and full transparency and feel safe in the knowledge that we have the experience and expertise, and more importantly credentials to secure the best deal. While for many clients this may be a once in a lifetime transaction, for others it is potentially one of many. On this occasion we already had a relationship with one of the clients on another mandate during which in parallel he reached out to us regarding another one of his businesses, Web4U, a leading web hosting provider.

Acquisitions are really the only feasible option in a flat market which is good news for companies with strong market positioning

Our clients had been contacted by a local consolidator interested in the business and after receiving some initial data from the Web4U client, had made an offer. He asked us to review the offer which we did and based on our experience and knowledge of the sector we quickly realized that the offer was far too low and advised them not to accept. Both clients, each owning 50% of the company, also had equity stakes in other IT/Tech ventures which they were looking to focus on (one of the clients, for instance, Packeta, a disruptor tech logistics company on track to become a unicorn). This in conjunction with the obvious market interest for the business and our valuation expectation, which was higher than theirs, resulted in them taking the decision to sell the business, mandating us to commence a full-scale sale process.

Niche Market with Ongoing Consolidation Plays

The web hosting market in Czechia was previously quite fragmented, with relatively low market concentration. However, over the last decade or so, we have been seeing major shifts with a trend towards consolidation on two different levels:

• Local companies: Aggressively acquiring smaller peers and/or gaining market share by aggressive marketing and becoming well recognized players on other foreign markets (e.g., Wedos, Gransy, Zoner, and Webglobe)
• Foreign global companies: Acquiring the larger domestic targets to establish themselves on the Czech market (e.g., Aruba and Loopia)

Since the Czech market is relatively flat acquisitions are really the only feasible option for companies looking to build scale, penetrate new market segments and innovations, expand their service portfolios, and obtain crucial talent often difficult to achieve organically. This is good news for companies with strong market positioning such as Web4U, especially from the shareholding value point of view.

Demand from International Strategics

Founded in 2000 and headquartered in Prague, Web4U is a leading provider of web hosting, domain registrations, mail, and server housing and hosting services. It is currently the 4th largest independent hosting company in Czech Republic and has 70,000 registered domains and more than 15,000 unique customers across the public sector and SME market. Aware of the market dynamics, and the company’s strong market position, we were confident it would drive a strong competitive process and generate considerable interest from both regional and international players looking to establish themselves in the region. In fact, we approached nearly 50 interested parties during the process.

Early on, when we began to research and approach the international market, we reached out to our IMAP partners knowing they could provide local support and crucial direct access to key decision-makers. Among others, we collaborated with our colleagues from IMAP Hungary who secured an NBO from an international strategic and with IMAP Netherlands who had a relationship with one of the largest strategic players in the industry. At the same time, our colleagues in IMAP Sweden who had significant experience in the sector having closed many deals and knowledge of the local culture, also secured an NBO from Miss Group which would later turn out to be the final buyer of Web4U.

Market Expansion Through Ongoing M&A

The Swedish buyer, Miss Group, was founded in 2014 by serial entrepreneur Mattias Keneteg. An international web hosting group, it offers a wide range of hosting related services including web hosting, domain registration, VPS, dedicated servers, website build, SSL-Certificates, SEO Tools, web security, and domain management. It is also an ICANN-accredited Domain Name registrar via Name ISP. Well-established in its core markets, it has a customer service-oriented model driving industry-leading performance metrics for its 700,000+ web hosting customers in the Nordic and DACH regions, as well as Europe and North America.

Since 2020, Miss Group is majority-owned by Perwyn, an international private equity and growth equity investor whose ongoing M&A and international expansion supports its growth ambitions. Web4U takes the total number of acquisitions completed under Perwyn ownership to 13. Miss Group’s ambitious growth trajectory saw proforma revenues for the year ending December 2021 reach €66 million with a 43% EBITDA margin and it anticipates reaching €100 million in turnover and a 45% EBITDA margin within the next 12 months. Perwyn’s strong acquisition track record and support were among several supporting factors in the decision to choose Miss Group.

Exceeding Client Valuation Expectations

On this occasion, with collaboration from our IMAP Sweden colleagues, we were actually able to complete the sale without ever physically meeting the buyer. Furthermore, our clients never met or directly negotiated with the buyer either with all these services handled by IMAP and supported by a legal advisory team. Therefore, communication was key throughout to ensure a smooth process, as there were numerous parties engaged, including not only representatives from Miss Group, but also their multinational advisory teams.

Future M&A activity in the Czech Republic and Slovakia will be foremost dictated by the willingness of company owners that remain independent to continue to resist repeated offers from large international consolidators

Following a month-long preparatory phase, and after commencing the marketing phase, the entire sale process took six months. It included a carve-out of the web hosting entity to a NewCo resulting in several waiting periods dictated by legal constraints and additional work preparing the considerable amount of documentation required. Our team handled the complete sale process, from market research through carveout technicalities, valuation, and SPA negotiations, to payment collection. Given the carve-out this process was actually quicker than usual.

In the end, we were able to deliver a final price considerably above our clients revised expectations, which was in fact, significantly higher than the initial offer that triggered the sale process. The process has been completed and Miss Group is now commencing its supervisory involvement. For now, Web4U will continue independently, with its local team and some finance/controlling functions being supported by Miss Group.

The IMAP Partnership at its Best

It was crucial for our team to have the support of our IMAP partners to secure the best solution for our clients. IMAP Sweden’s knowledge and experience in the sector, local insights, and access to key strategic buyers, including direct contact with the Founder of Miss Group, Mattias Kaneteg, as well as local standby support throughout the entire process enabled us to achieve the best conditions for our clients.

Trends Expected to Drive Activity in the Sector

In the Czech Republic and Slovakia, we expect an ongoing consolidation of the market segment. However, we will see a rapid decrease in the pace of M&A deals compared to the past decade. As the market is relatively consolidated, future M&A activity will be foremost dictated by the willingness of company owners that remain independent to continue to resist repeated offers from large international consolidators. Consequently, established players will continue to put great emphases on marketing to seek gains at least a few tenths percent higher than organic market growth (2-3%), as well as monitor any potential acquisition opportunities. Alternatively, looking at a less penetrated, developed, and consolidated market might prove another attractive option for growth.