Will team.blue end up dominating European web hosting?

I would not want to pursue a software rollup strategy in a vertical of interest to HgCapital. Unfortunately, there are a few. Accounting. Payroll. Tax. 

Turns out, also web hosting. Since 2019, Hg has owned team.blue (TB), an “online presence” rollup. Headquartered in the picturesque city of Ghent, Belgium, TB primarily serves small and medium-sized enterprises (SMEs) as well as private individuals.

We do not know whether Hg plans in 5-year increments. Either way, they shot the lights out with the first one. TB’s revenues and EBITDA are on track more than double between 2019-24, reaching €655M and €250M respectively, according to S&P. 

This is not to say that other PE firms are not able to keep up - a few are active in this space. Looking at TB’s financials, one cannot help but wonder whether one day it could dethrone Visma as Hg’s most valuable portfolio company? 

At the same time, TB’s strategy is simple enough to evoke the lyrics of a 1997 smash hit by the Italodisco / Eurodance sensation Eiffel 65, “Blue (Da Ba Dee)”:

Let me translate. Hey SME owner (the “little guy”): we have got your domain name sorted. And your hosting. And your privacy plugin. And your e-invoicing solution. Don’t shop around! Stick with the blue! 

Fun fact: TB’s predecessor Register Group and Eiffel 65 established only two years apart, both in Italy. 

As years went by, the Italodisco genre fell out of favour. However, the legacy of Eiffel 65 lives on - in countless remixes and cover versions (David Guetta and Bebe Rexha did a decent one). Register Group too is going strong. Its longtime head Claudio Corbetta was promoted to the Group CEO role in 2022.

Now seriously: Hg has managed to build a multi billion business in an industry where it did not have an unfair advantage nor a handicap. 

In this article, we detail:

• Hg’s 3-part playbook for value creation with team.blue

• What it has bought so far, and why

• How team.blue can sustain a €2B debt pile

• What Hg’s illustrative return profile looks like - so far 

The beginnings

TB was formed in 2019 after Hg acquired Combell Group (Belgium) and merged it with TransIP (the Netherlands) and Register Group (Italy). 

Combell was not exactly a minnow to begin with. Under the ownership of Waterland, a renowned mid-cap buy and build investor (see case study of its accountancy rollup in the UK), it had completed 10 acquisitions in 4.5 years, achieving revenues of €80M. 

TransIP too had been PE owned, albeit only for 1 year, by EQT, during which time apparently it “had developed and generated a substantial growth and EBITDA increase, seeing a particular strength in VPS (Virtual Private Server) and WebHosting products within its core tech savvy customer segment”. 

Finally, Register Group had been acquired by Hg in a take-private transaction already in 2017. 

Value Driver #1: A Fast-Paced but Targeted M&A Strategy

Subscribe to Premium to read the rest.