You want to sell your hosting company? Then it's good to know what the acquisition market in the field of hosting companies looks like. With the increase of investment companies in the acquisition market looking to expand their web hosting portfolio, there will continue to be a wave of consolidation in the coming years.
Rabobank expects further consolidation, given the standardization of infrastructure ICT services and cloud adoption by the business community. Traditional hosting companies face strategic choices in their quest to create as much added value as possible. Roughly speaking, these are specialization, consolidation or carrying multiple services/services.
There are many ways to value a business. A common method of expressing the value of a business is "a factor x gross annual profit." This factor is also called multiple and another designation for gross annual profit is EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).
In IT services, the sector to which hosting companies belong, an indicative EBITDA multiple range of 5.9 to 7.2 is currently used, according to the Brookz Takeover Barometer. The average EBITDA multiple across all SME sectors is 4.90.
The valuation of a business is often the starting point for negotiations between buyer and seller. The outcome of these negotiations is the final sales price. So valuation and price are two different quantities. Besides valuation, the price is also determined by possible scarcity in the market, bargaining power of the parties, the strategic value of the business for the buyer and possible synergy effects for the buyer (cost savings, purchasing advantages).
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Want to buy a business or sell a business in the IT Services & Software Development sector? With this Brookz Sector Monitor, we want to present buyers and sellers with facts, figures and an outlook that provide insight into the number of transactions, the value development of businesses and the latest trends and developments in the IT Services & Software Development sector. Because in any buying or selling process, thorough preparation provides peace of mind, overview and structure.
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Hosting companies that have bet on lowering prices are working hard to scale. Without sufficient economies of scale, these parties will have a very difficult time, according to ICT consultancy PinkRoccade. This market segment is therefore characterized by takeovers and bankruptcies. Hosting companies that focus on niches or on providing added value are struggling, with keeping their services affordable.
One trend that market experts foresee for the coming years is a further consolidation trend. Mainly investment companies working on their IT portfolio are rapidly acquiring small and medium-sized hosting companies to merge them and benefit from economies of scale.
In figures, the number of hosting companies in 2024 looked as follows(CBS):
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A number of trends and developments will inevitably cause changes in the coming years, but also offer hosting companies many growth and acquisition opportunities:
Many businesses and individuals are transitioning their server(s) to the cloud. Cloud-based services are enjoying increasing demand, leading to strong growth among hosting companies, according to ABN Amro. Hosting companies, in turn, are also starting to offer cloud services. After all, one in five organizations in the Netherlands puts cloud solutions first when making choices in its IT, according to research by industry association DHPA.
With the rising demand for IT services, the demand for IT personnel is also rising. Staff shortages are a problem for more than 30 percent of businesses in IT. These shortages are expected to continue in the future. In addition to the demand, the number of IT businesses is also rising, increasing competition throughout the IT sector.
By 2020, over twenty billion devices will be digitally connected (with each other), the Internet of Things. This will lead to a huge amount of data and a lot of demand for advice and solutions for this. Hosting companies that capitalize on this trend can develop new business models. Consider, for example, edge computing; the processing of data at the "edge" of the network. This information from IoT devices can then be shared in the cloud.
One of the targeted web hosting trends is the green hosting provider. The Internet's current CO2 emissions are equivalent to 31 million cars, running at the same time, every year. There is widespread investment in carbon offset schemes. Eco-friendly initiatives are springing up like mushrooms, and important certificates, such as REC and VER, are playing an increasing role.
According to Rabobank, the war in Ukraine does cause IT problems. The development capacity of digital businesses lags behind and cybersecurity comes into play.
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