It has recently been revealed that Site5, a host we have followed over the past few years has now been purchased by EIG. The news was published in EIG’s second quarter earnings report which also mentioned that Site5 along with Verio was acquired for a combined total of $36 million.
The second quarter earnings report for EIG stated “During the quarter, the company acquired assets of Verio and Site5. The total cash consideration for these acquisitions is expected to be approximately $36 million.”
In subsequent Endurance International Group Holdings, Inc. Q2 FY2015 Earnings Conference Call on the 4th August 2015 it was revealed via prepared remarks that between all of EIG’s brands they have a combined total of 4.4 million subscribers, with the recent acquisition of Site5 and Verio making up approximately 86,000.
Doing some quick math, it would seem that EIG has paid around $418 per subscriber, although we suspect much of the price of purchase are for Goodwill, Branding, and Assets.
The prepared remarks further revealed that:
Site5 was bought for $23 million
The first, which closed in late May, was the U.S. retail hosting business of Verio, for total cash consideration of $13 million. The second, World Wide Web Hosting, which reaches subscribers via the Site5 brand, closed in late June for a total cash consideration of $23 million.
Users are to be migrated to EIG’s Back End Platform
Secondly, until the Users are migrated to EIG’s “back end platform” the new acquisitions do not appear to be overly profitable, which might indicate something about how they were run:
We expect to manage these businesses at break‐even to marginally profitable for the rest of the year as we migrate their subscriber bases to our back end platform. Once on platform, we expect to reach favorable economics and adjusted EBITDA contribution consistent with our previous framework for realizing synergies from acquisitions.
Integration to start this year
Thirdly, we get a glimpse of the time scale for integration with EIG’s existing systems:
We also expect to report integration and restructuring costs in each of Q3 and Q4.
This would imply that integration of the Back End Systems which we take to mean billing, support and possibly client area systems although we are just speculating here. We do not believe it relates to hosting servers or locations and we cover why later in the article.
Public Reaction & Site5 CEO Comments
Soon after the news broke a forum thread appeared on popular web hosting forum Webhostingtalk. Webhostingtalk is known for anti-EIG sentiment (whether there is good reason for that view, or whether spreading that kind of information helps the smaller companies that frequent such forums are open to debate), and so many people posting were somewhat disappointed to hear of the news:
We won’t go into much detail on the negative views, suffice to say in the past some EIG brands have suffered a little post-purchase (i.e. Hostgator), but that was a few years ago, and we suspect that more recent acquisitions have gone more smoothly.
Certainly more recent acquisitions such as Arvixe has not seen anywhere near the same issues, and indeed A Small Orange \ Hostnine remained highly recommended by us for some time after their acquisition.
What we do want to highlight though is some of the information revealed by the Site5 CEO, Ben Welch-Bolen.
Site5 will join the Hostgator team
With Ben having connections with Hostgator (formerly employed by them when they first started) he was keen to praise their quality and that they will make a great home for the Site5 customers. Here is what he had to say:
Thanks! I wouldn’t have done this deal if I didn’t believe that HostGator/EIG would be an amazing home for our clients and brands! I was the first official employee at HostGator a long time ago, because of that I have a lot of friends at HostGator/EIG, and they are a fantastic team that is driven to constantly improve and learn. I know this forum has seen some rough spots and growing pains over the years, but please keep in mind that no host is perfect 100% of the time. We at Site5 have made plenty of mistakes in the past, but what matters is the constant drive to improve and learn. HostGator/EIG have that quality, and they are going to make a great home for our clients.
Site5 CEO to remain at company for next year or two
He further went on to say that he and his team will be there for the near future, and later in the thread indicated that he would remain at the company for the next 1 - 2 years:
The reason I don’t have an exact answer to how long I will remain is that our senior team and their team are working closely to figure out future steps, but right now it is just business as normal. I care deeply about our customer base and don’t plan on leaving anytime soon, I would imagine I’ll be around for at least the next 1 to 2 years.
This is kind of interesting, as after EIG purchased A Small Orange and related brands the CEO Douglas Hanna also remained for two years. We found that during this time there was no noticeable impact on the services offered. However, we feel since he left in May 2014 the attention to detail when it comes to customer support has suffered a little. We just wonder if something similar will happen with Site5 and that customers may not notice any changes for some time, if at all.
No Plans to reduce Server Locations
One of the main features of Site5 is the multiple server locations in many places throughout the world:
We have no plans to end what is one of our core product features, we love giving customers the ability to have plans in multiple regions, and place their website close to their visitors.
This is probably very critical to their success moving forward, as it can be very beneficial for local businesses to host their website close to their visitors for increased performance.
Final Thoughts
While we have indicated that we don’t think much will change in the near term, there are clearly going to be changes to some of the management processes at Site5 this year. EIG has much experience with acquisitions, so we expect this to go smoothly, but with any change, you would expect a few issues to crop up. As a result, we highly suggest you start making your own backups of your websites and storing them off-site (you really should be doing this anyway, as most hosts won’t guarantee their backups).