GoDaddy Acquires Host Europe Group for $1.79 Billion

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GoDaddy has made a huge bet in expanding its international presence Tuesday with the acquisition of Host Europe Group for €1.69 billion (US$1.79 billion), which will give it a strong footprint in the U.K. and Germany.

The transaction is expected to close in the second quarter of 2017, according to GoDaddy. The purchase price represents 11x HEG’s 2016 estimated adjusted EBITDA including “anticipated annual synergies.”

HEG, which is currently owned by private equity firm Cinven, started shopping for buyers earlier this year. Within recent weeks GoDaddy emerged as the most likely candidate as other rumored buyers dropped out of the bidding. (United Internet was acquired, and Deutsche Telekom dropped out of the bidding for HEG citing a lack of organic growth prospects and possible integration challenges.)

GoDaddy plans to integrate the majority of HEG’s business while it explores strategic alternatives for HEG’s PlusServer managed hosting business,  including a possible sale, GoDaddy said.

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The acquisition of HEG will help GoDaddy extend its small business focus in the European market. HEG has more than 1.7 million customers across its brands including 123Reg, Domain Factory, Heart Internet and Host Europe. HEG also owns the World Hosting Day and NamesCon brands and conferences. GoDaddy plans to continue to operate those brands independently.

“GoDaddy has successfully expanded its international business to 56 global markets over the past four years,” GoDaddy CEO Blake Irving said in a statement. “HEG has built an impressive business that generates strong top-line growth, high margins, and industry-leading customer satisfaction. By joining forces with HEG, we accelerate our expansion into Europe with the delivery of a broader range of cloud-based products, built on a single global technology platform, and supported by unparalleled customer care to help small businesses and web designers succeed online.”

GoDaddy’s international revenue grew by 27 percent in Q3 2016, representing a huge opportunity for the SMB-focused hosting and domains provider.

“The acquisition of Host Europe Group signals GoDaddy’s prioritization of growth in markets outside the US and gives it a solid foothold in two of Europe’s biggest markets: Germany and the U.K.,” Philbert Shih, managing director of Structure Research told The WHIR. “The SMB-focused hosting market continues to mature and with maturity comes the need to access new market opportunities. Extending geographical scope is one obvious way of doing this and GoDaddy has decided to try and accelerate that through M&A.”

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HEG Group CEO Patrick Pulvermüller will lead the company’s combined European operations, and report to Andrew Low Ah Kee, GoDaddy’s Executive Vice President of International.

“In combining with GoDaddy, we see a remarkable opportunity for our customers, partners and the small business ecosystem in Europe,” Pulvermüller said. “What stands out is the strategic alignment of the companies – we’re both driven to empower people to transform their ideas and bring them to life online. Together GoDaddy and HEG will provide even more value for our customers and introduce new solutions to help their ventures succeed.”

HEG has offices in Germany, the U.K., France, Spain, Romania, and Bulgaria.

Update: This story has been updated with a comment by analyst Philbert Shih.

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