Buyer Profile: Endurance International Group
Each month we profile active buyers of SMB-focused startups. While we may know the buyers well, the information used in these posts only contain publicly available information.
This month, we are taking a look at Endurance International Group (EIGI) as an acquirer. Check out our previous buyer profiles for Atlassian, Groupon, Deluxe, GoDaddy, Sage and Intuit.
Endurance International Group started off as BizLand in 1997, a web hosting company. The company has a history tightly linked with private equity — 58 out of its 76 acquisitions have been leveraged buy-outs.
The business had been owned by various private equity firms, tossed around like a hot potato. In 2003, Audax Group bought out the company, followed up Accel-KKR and Tregaron Group in 2008, then Warburg Pincus and Goldman Sachs in 2012 for the sum of $1 billion. In 2013, the firm finally filed for an IPO to the delight of its PE shareholders. Today, the market cap stands at $1.14 billion.
The only constant throughout these financial manoeuvrings has been the firm’s Founder & CEO, Hari Ravichandran, who built the business from scratch following his graduation from Stanford University. He remains as CEO today.
EIGI has grown largely through acquisitions, buying up a large number of other hosting and related companies. Since 2004, the company has acquired 78 companies.
Here’s a look at its acquisitions by year:
Endurance has been an active buyer every year since 2004. 2010 stands out as a particularly active year when they rolled up 36 other hosting providers.
It’s likely that macroeconomic factors played a role in that rollup. Following the 2008 financial crisis there were few buyers and valuations were depressed. This was perfect time for Endurance, backed up by big PE wallets, to quickly consolidate the market.
Here is a look at the acquisitions by segment:
It’s clear to see that the vast majority of EIGI’s acquisitions have been to help it grow marketshare in the website hosting space. The largest acquisition within that segment include Host Gator for $300M. With the strong competition of GoDaddy buying up players in the space as well — especially the acquisition of HEG for $1.8 billion — it’s likely EIGI will consider other acquisitions to boost its product offerings to compete.
Here is a look at the acquisitions by deal size:
As a large number of EIGI’s acquisitions were made prior to it becoming public in 2013, the vast majority of its acquisition prices were not disclosed. The largest acquisition to date has been $1.1 billion for Constant Contact. The smallest disclosed deal was for $5 million for Fortifi.
Here is a look at the acquisitions by location:
Most of EIGI’s acquisitions have been in the US. They have recently started acquiring companies internationally.
Here is a look at the acquisitions by age of the companies:
As a significant number of EIGI’s acquisitions were for the customer base of the company, it’s not surprising to see that the vast majority of its acquisitions tended to be over ten years in age. The companies that tend to be younger in age (i.e. less than 5) are IT/Dev Tools — where technology is the primary motivation.
Most Recent Acquisitions:
3 out of the 5 most recent acquisitions have been non-hosting companies, signalling a greater interest to offer more value added solutions to its large base of SMB customers. Its acquisition of Constant Contact for $1.1 billion is massive for the company, and it’s likely that Endurance is still chewing through it.
Looking Forward…
With a high number of EIGI’s individual brands losing subscribers to plays like GoDaddy and Amazon Web Services, the company is definitely feeling the crunch. Historically, Endurance has kept each acquisition as its standalone brand, however with the increased competition in the space, that strategy may change.
Some of the key strategies pushed forward in its Q3 2016 earnings call were to build greater brand awareness, cross-sell products, and expand channel mix. With EIGI having grown its capabilities largely through acquisition, it’s likely that there will be more purchases in the future as it tries to drive shareholder value.
At SurePath Capital Partners we help startups raise the capital needed to become market leaders. When the time is right, we help our clients achieve profitable, deliberate exit strategies. We only work with startups in the SaaS, e-commerce and marketplace segments. Across those segments we have a deep focus on companies serving the global SMB market. Say hello:info@surepathcapital.com
