Thoughts from ISPCON - who wants to buy a hosting company?

One of the questions I got the most at the spring ISPCON was "what does the market for hosting companies look like?" While I've handled 3 hosting transactions in 2007, my typical response is: "I don't know, ask DH Capital or Cheval Capital." But the real answer is: "it seems like the time is right." The time is right in three different ways: first if you want to sell; second if you want to buy; and third if you want to expand your business. How about that for covering all the bases?

On the sell side, there seem to be a number of companies out there who are interested in acquisitions. Not only are there the traditional roll ups, but there are those out there looking to add services that they don't have. I'm not seeing valuations that are much different than usual, but if you're realistic about what you can get, there seem to be buyers. On the buy side, there are more than enough small to medium size hosts who seem to have hit the wall in terms of facilities or growth, and are ready to sell. Indeed, the lines of hosts screaming "buy me, buy me," to brokers at these conferences seem to be growing. If it's time for you to get out, there's no time like the present. I'll be moderating an M&A panel at hostingcon that will discuss transactional issues from a buyers perspective.

Finally, I've seen a big increase in the number of hosting companies at the 7 to 20 employee level whose business is really taking off, and who are growing like gangbusters. What this indicates to me is that the consolidation at the top, such as it is, is not resulting in any barriers to entry. Rather, it seems to be resulting in great opportunities for small hosts to grab customers who may not be appropriate for the bigger hosts.