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(WEB HOST INDUSTRY REVIEW) -- Last week, Canadian merchant bank Clairvest Group (www.clairvest.com) and Clairvest Equity Partners III Limited Partnership acquired 17.2 percent of the common shares of managed hosting provider PEER 1 Network Enterprises (www.peer1.com) from Celerity Partners SBIC.
Vancouver-based PEER 1 has significantly grown since its inception in 1999 to become one of the largest player in the hosting market.
The company provides a range of services, including managed hosting, self-managed hosting, colocation and network services through 16 data centers located across North America and the United Kingdom.
The investment has the potential to be a lucrative one for Clairvest. So far, the merchant bank has been relatively quiet about its plans beyond the initial investment.
In an email interview with the WHIR, Clarivest principal Mitch Green explains why the Canadian merchant bank decided to invest in PEER 1 and the kinds of opportunities it hope it will bring.
The WHIR: Can you tell me why Clairvest was initially interested in investing in PEER 1?
Mitch Green: Our investment approach is to focus on industries or domains that have strong growth drivers, recurring revenues and a widely distributed customer base. We identified IT hosting as an attractive domain and devoted considerable time and effort over the past year in search of an attractive investment opportunity. PEER 1 quickly appeared on our radar screen due to its very solid financial and operating metrics. After we spent time with the outstanding management team and several major shareholders, we were keen to find a way to invest in the company.
What does the firm hope to gain from this purchase in the long run?
MG: Our mandate is to generate outstanding returns for our investors. Since this does not happen overnight with any single company, our approach as an investor in PEER 1 is to support initiatives that drive near term performance and also position the company for long term success.
Does the company have any plans to gain greater control of PEER 1 by acquiring more shares in the future?
MG: Clairvest may, depending on the market and other conditions, increase or decrease its beneficial ownership, control or direction over PEER 1.
How does this purchase fall in line with Clairvest's overall strategy?
MG: Our strategy is straightforward: identify attractive industries and then invest in a strong company led by passionate management. We think PEER 1 is a great fit for Clairvest, particularly the people and culture. As part of our due diligence, Clairvest commissioned a well known consulting firm to evaluate PEER 1. We are pleased to report that the company received top marks in service and support.
Are there other web hosting companies that Clairvest currently has its eye on for investment purposes?
MG: Our focus for now is on PEER 1. The company is in an excellent position to acquire complementary businesses should the right opportunities arise. Management has a demonstrated ability to successfully integrate customers, systems and cultures. There is access to significant capital for acquisitions and other growth initiatives.
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Read Back Issues of WHIR Magazine
October 2009 - Web Hosting's All Star Team
This has been, for us, one of the most interesting, exciting and challenging build-ups to an issue of the magazine yet, Web Hosting's All Star Team. The balloting process was our first experiment with a kind of user participation we're planning to do a lot more with in the months to come. We had thousands of ballots submitted, with hundreds of write-in suggestions and a demonstration of user engagement that has us feeling super positive about the project.
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July 2009 - What am I Worth?
One of the interesting luxuries of working on a project like the printed WHIR magazine is that it allows us to play with things like our point of view from one issue to the next. In recent months we've been giving added attention to the kind of practical and applicable advice aimed at smaller hosts and resellers. This issue carries on with that point of view, asking, in our cover story, "what am I worth?" It's a complicated question without a clear-cut answer.
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May 2009 - The Blueprint for a Small Web Host
I was a little surprised by how difficult it became to see this idea through. We set out to assemble a blueprint for a small hosting business, but butted up pretty quickly against the general impossibility of covering all the territory that was out there to be covered. The basic constraints of a printed magazine, and the less-than-infinite amount of time we had available forced us to face the fact that we could never produce an exhaustive guide to starting a hosting company.
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