HEG

Activity
Hosting and domain services
Transaction value
£584 million
Acquired
Aug 2013
Realised
Apr 2017
Sector
TMT

Business
Headquartered in the UK, HEG is a leading European provider of hosting and domain services to consumers and small and medium enterprises (SMEs). It offers a complete product suite including domain services, application hosting, cloud hosting and managed hosting. It also has an emerging software-as-a-service offering.

The Group has approximately 600 employees and a strong market presence in the UK and in Germany, with a smaller presence in Austria, Switzerland and Spain. Its well-recognised brands include 123-reg, Heart Internet and Host Europe.

HEG has a track record of strong growth in revenues and EBITDA of 16% and 22% CAGR, respectively, for the past four years and is expected to continue to generate double digit growth in 2013.

Cinven's fifth Fund acquired HEG in August 2013 for a total consideration of £438 million.

Cinven's TMT team identified a number of attractive features in the sector and in HEG.

  • The hosting industry is growing rapidly, driven by structural trends in cloud computing and increased web-presence amongst SMEs.
  • The European hosting market remains highly fragmented and offers significant consolidation opportunities.
  • HEG has established market leading positions in its core markets and is in a position to leverage a large base of 1.5 million customers, well-recognized brands and best-in-class technology platforms.
  • The company has an attractive financial profile including strong organic growth and high earnings visibility due to its subscription model.
  • The management team is highly experienced and has a proven track record of driving growth.

Strategy
Cinven’s strategy for HEG is to:

  • invest in the business to meet the fast growing demand for hosting services in its core markets;
  • grow the value of its large existing customer base through both cross-selling and up-selling additional applications and services; and
  • use the group as a platform to consolidate the fragmented European hosting market.

HEG's market position has been secured through investment in its infrastructure, marketing and the leadership team. These features, in combination with strong structural growth in its markets, make HEG a compelling investment opportunity.

Progress
HEG completed its first follow-on acquisition in October 2013, acquiring Telefonica Germany Online Services GmbH (TOS). This was followed with the second successful acquisition of domainfactory in November 2013. These acquisitions are consistent with our strategy of consolidating a highly fragmented hosting market in Europe.

In January 2015, HEG acquired intergenia, the second largest German managed hosting company behind HEG.

In April 2017, Cinven fully realised  its investment in Host Europe Group following the sale of the business to GoDaddy Inc.