Hosting company, iomart, has purchased Hampshire-based Redstation– a provider of dedicated servers and bandwidth. iomart has paid £6.6m as an initial consideration, of which £5.1m has been paid in cash and £1.5m satisfied by the issue of 515,464 new ordinary shares.
iomart describes its strategic goal as “providing the 'picks and shovels' of the cloud environment”, and certainly the purchase of Redstation supports its objective to address complex infrastructure needs. Furthermore, we are not surprised at all to see iomart buy again. In its financial year to the end of March 2013, it acquired Melbourne Service Hosting Ltd, Internet Engineering Ltd and Skymarket Ltd. Indeed, acquisitions helped boost FY13 revenue by 29% to £43m. In addition, underlying organic was impressive, with its hosting business (revenues of £32m) growing by 20%.
The degree of acquisitive activity in the hosting industry continues apace. We can think of many in the last year or so, including: Pulsant acquires ScoLocate, Acquisition number 11 for 6 Degrees, Adapt acquires Sleek, and NetBenefit sold to Peer 1. With so many smaller players, consolidation in the industry is inevitable. However, we know just how difficult it can be to wade through the many possible purchases to identify the highest quality firms.
Hosting and cloud services – Provisioning, as we call it – is the strongest growing sub-segment of the £13.8bn infrastructure services market. By 2015, we forecast that growth in the Provisioning market will reach double digits against the backdrop of a ‘flat’ infrastructure services market. These are exciting times for players, and we have no doubt there will be many more acquisitions to come as firms look to take advantage of the market opportunity.