(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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