Web Hosting M&A and the Question of Branding

Web Hosting Acquisitions Open Digital Frontier To M&A

Web Hosting M&A and the Question of Branding

Mergers and acquisitions make the corporate world go round. Both have similar aims – they combine two previously separate firms into one single entity. Significant operational advantages can be obtained when two firms join forces, and the goal of most M&A deals is to enhance company performance and shareholder value.

Advantages of a merger? This is a mutual decision between two companies to capitalise on synergies to boost efficiency and profitability.

Advantages of a full acquisition? This is an opportunity for one firm to knock out the competition and increase market share. This takeover can be friendly or take the form of a hostile bid.

But whether the operation is a merger of equals or a move to eliminate an industry peer, the issue of branding needs careful consideration.

POST-MERGER BRANDING

Is it more advantageous to maintain two individual brands, or just one? A lot depends on corporate culture and consumer perceptions, particularly when the deal is cross-border.

German Internet giant United Internet’s buyout of Spanish web hosting provider Arsys is a case in point. United Internet’s web hosting provider 1and1 has grown organically in Spain and competed with Arsys to reach the top of the ranking for web hosting services.

Its 140 million euros acquisition of Arsys  from venture capital firms Mercapital and The Carlyle Group is another step in the internationalisation of United Internet’s web hosting and cloud computing business. But it plans to keep Arsys as an independent company, building on its success by retaining its brand name and management team.

MORE DIGITAL M&A IN THE CARDS

One of the biggest M&A trends last year was large web hosting companies and IT service providers making multiple acquisitions to expand their portfolio of hosting properties. Many of these deals were cross-border, such as British managed services provider Claranet’s purchase of French web hosting provider Typhon.

While Arsys is not a giant of the global web hosting industry, United Internet’s interest in the company reflects the growing importance of the Spanish market for major overseas players, which will fuel further M&A

One of the reasons behind the failure of any merger or acquisition is often the resulting conflict between the combined entities’ marketing and cultural communications strategies. By maintaining Arsys’ independence and brand name, United Internet can take advantage of skilled staff, an established brand and a large existing client base.

For information on M&A in Spain’s web hosting industry, contact corporate law firm Argali Abogados.

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