The Real EIG HostGator Deal Valuation


This is the second time in a month I have written about the press being far off on deal estimates and valuations. Last year, the media reported that Endurance International Group (EIG) purchased HostGator for $225 million. At that time I wrote a blog stating my numbers were at least 20 percent greater, adding some $50 million. I discounted my ideas as I feared everyone would think I’m crazy by indicating the press was off some 25 percent or even 30 percent. EIG’s $400 million IPO revealed many secrets, and I was not crazy.

EIG paid $299.8 million for HostGator, fully 33 percent over the value others prognosticated. I was very right.

Deal structure means everything: On July 13, 2012 EIG paid $227.3 million in cash at closing to HostGator. However there are two post closing payments,  $52.3 million and $26.2 million in July 2013 and January 2014, respectively. A tiny $2.3 million was reported as SG&A. Total $299.8 million.

In reading through the IPO I believe this was a must-do deal for EIG. After all, the company is going into the IPO with some $500 million in annual revenues with $150 million courtesy of the HostGator transaction. It makes me wonder if it would be wise to even attempt this IPO without the benefit of HostGator.

A couple of other quick observations; buried in the numbers one finds that HostGator had a higher EBITDA percentage than EIG and average rates are almost identical between the two firms.

I know you want valuations:

Multiple of annual revenues: 2x

Multiple of EBITDA: 6.8x

The EBITDA number I used was after adding back the $19.9 million Brent Oxley, owner of HostGator, paid out on July 12, 2012 as bonuses to staff.

Doubling your money is always a good idea. Last year it was reported that EIG had a $2 billion valuation. Moving the pieces around the chessboard $600 million could be attributable to the HostGator acquisition.

Now that is straightened out we can get back to business.

Oh yes, please consider following NCC on Facebook.

Later, Tom

Find out more about Tom Millitzer: NCC International 

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  1. Hey Tom, Deal structure is "always" the thing. Numbers can be "spun" to look good, but when looking deeper it's always the structure of the deal that tells the story of who wins and who loses (among other possible variables). Best

  2. Didn't knew about it. Thanks for sharing this...

  3. Yes, Hostgator service is not what it once was., I will not be renewing my subscriptions with them and am looking for a non-EIG hosting company to host with.

  4. juan gacia

    is hostgator going out of business? their wait times for helpdesk are over 20 minutes, and servers go down frequently, with resolution taking well over 8 hours.

  5. Well that's Good for past hostgator owner(s). Though Hostgator clients lose with this deal, their service degraded significantly after this deal.

  6. EarlyOut

    @ robert: Hostgator WAS a great company. Since the EIG takeover, things have been a bit of a shambles, with a series of highly-visible "upgrade" failures, primarily involving moving of accounts from leased space at SoftLayer to the EIG-owned datacenter in Provo, UT, which is actually Bluehost, another EIG acquisition. Servers down for days, long delays in responding to support tickets, etc., etc. Quite a display of corporate incompetence.

  7. great article. Hostgator is a great company. I didn't know what EIG was before.

    • I got news for you, HG is NOT not a great company. It won't be long until you realize this.

  8. Sean Thome

    Very interesting story. Is there anywhere online that I can read the info about EIG's IPO numbers? I did a search for them and just found some general news articles.

  9. Zee Chen

    Wow this is the only place I have seen that. Can't blame Brent but I HATE EIG and am leaving hostgator and taking my 200 plus clients with me.