European Hosting Firms Find Growth Through AcquisitionsAdam Eisner, theWHIR.com
February 14, 2002 — (WEB HOST INDUSTRY REVIEW)– Though 2002 is not yet two months old, it’s already shaping up to be a busy year for the hosting industry’s buyers and sellers in Europe.
North America’s hosting industry was defined by mergers and acquisitions in 2001, and similarly, European ISPs and telcos are beginning to eye other companies closely during the recent economic slowdown. In fact, a number of firms have already increased their service portfolios and customer bases through the acquisition of financially troubled companies this year.
Lancaster-based Business Serve (businessserve.co.uk), for example, has made two purchases in recent months that have helped to greatly increase its profile. In October 2001, the company purchased selected hosting assets of OnCue, a company whose original purpose was to build its own network and “be the rival to British Telecommunications on the rollout of broadband in the UK,” said Martin Molz, Business Serve’s Director of Customer Services. But as both the networking industry and overall economy began to falter, the company’s U.S.-based backers pulled out, not because of a lack of funding but because of a lack of confidence in the market. This forced OnCue in to liquidation, leaving behind “some really nice assets that they needed to sell,” Molz said.
In January of this year, the company was notified of a similar situation regarding Cerbernet, an Internet services firm operated by now-defunct UK communications firm Atlantic Telecom. Business Serve purchased the business and assets, adding additional clients, services and facilities to its roster.
Lorraine Whinn, Business Serve’s Sales Director, said the acquisitions ultimately allow the company to expand both its service offerings and target markets, which were previously restricted. “Traditionally, I suppose, the Business Serve [customer] base has been SME businesses,” she said. “And now with this new infrastructure, we can really broaden the range of products that we’re able to sell.”
Domain name registrar Register.com (register.com) also got seriously involved in Europe’s Web hosting market earlier this month when it announced it would purchase struggling European Web host Virtual Internet, which hosts over 106,000 domains, pending approval from Virtual Internet shareholders.
“This offer? would foster Register.com’s growth in the U.K. and Europe, particularly in the corporate domain name services market,” CEO Richard Forman said. “The combined expertise and knowledge of Register.com and Virtual Internet will allow us to develop new products and services for our customers, targeted to their needs.” Approval of the deal is expected to only be formality.
And just prior to Register.com’s acquisition, KPNQwest (kpn.com) was given the green light by the European Commission to purchase Global TeleSystems, parent company of communications firm Ebone. KPNQwest, a joint venture between KPN, a Dutch telecommunications provider and Qwest, picks up 15 hosting centers and a network that serves 25% of all Internet users.
Unlike most of the deals made in North America last year, many of the firms involved in mergers and acquisitions thus far in Europe did not involve pure-play hosting firms. What’s more, many of the deals conducted last year involved companies banding together for protection or greater market share. In Europe, however, it would seem that companies are still being sold almost exclusively due to financial distress. But despite the differences in specifics at this point, there is one obvious commonality: European and North American hosting firms seem to agree that buying growth is a better route to success than organic growth, particularly during this tough economic period.
