Cloud M&A: Rackspace Again?

August 8th, 2016 by · Leave a Comment

Late last week, rumors of a big cloud M&A began to bubble up from below.  It seems that Rackspace may have finally found the white knight it has been seeking on and off for a couple of years.  The talk is that they are in talks with Apollo Global Management to either take the company private or buy a controlling stake.

The price tag would supposedly be some $3.5B, for which Apollo would get $2B in cloud and hosting revenues that earned $122M in 2015.  That was enough to get the street excited, pushing the stock up 10% by the end of the day.

Rackspace was actively seeking a buyer two summers ago, with at least one large telecommunications and infrastructure player at the top of many lists: CenturyLink.  But they didn't pull the trigger and instead were before long linked to rumors of selling their own cloud and/or data center businesses.  Rackspace, meanwhile, couldn't get the price they wanted and decided to tough it out as an independent in a market increasingly dominated by the likes of Amazon, Google, and Microsoft.

Whether the talk of Apollo or some other private equity group now moving in to buy Rackspace pans out is an open question.  It's somewhat remarkable that no matter how thick history has been in the last two years, this particular situation hasn't changed very much.

But Rackspace reports earnings after the markets close today, so assuming nothing immediately results from all this you can bet the topic will be on the mind of analysts on that call.

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Categories: Cloud Computing · Datacenter · Mergers and Acquisitions

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