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Rackspace Agrees to $4.3 Billion Buyout Offer From Apollo Global

In accepting the buyout bid, the publicly traded 18-year-old managed cloud company will become privately held, a move that industry watchers applaud.

Lynn Haber

August 26, 2016

2 Min Read
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**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in May-June 2016.**

Friday’s news of the $4.3 billion acquisition of Rackspace Hosting by Apollo Global Management confirmed buyout rumors that have waxed and waned over the past few years.

In accepting the buyout bid, the publicly traded, 18-year-old managed cloud company will become privately held, a move that industry watchers applaud.

“This acquisition appears to be financial versus technical and is a move to get Rackspace out of the public realm, to not be tied down by bureaucracy of a publicly traded company, and allow it to be more nimble,” Charles Weaver, CEO and co-founder of the MSP Alliance shared with us. “I’ve think you’ve seen them, for a long time now, moving away from commodity types of things like infrastructure-as-a-service and more towards their roots, which is in managed services,” he added.

“This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board over many months,” wrote Graham Weston, co-founder and chairman of the board of Rackspace, in a company blog. “Our board, with the assistance of independent advisors, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders. We are also excited that this transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings. We are confident that as a private company, Rackspace will be best positioned to capitalize on our early leadership of the fast-growing managed cloud services industry.”{ad}

The question for Rackspace partners, i.e. digital agencies, master agents, systems integrators, VARs, solution providers and MSPs who collocate with Rackspace, is how the sale of the company impacts their business.

Given that the acquisition appears to be financially driven rather than technically driven, as would be the case if the purchaser were a technology company – like Verizon, for example, with existing technology, customers, account reps, middle management, etc. – there appears to be less risk to partners.

That’s unless there’s a new management scheme, Weaver cautioned. That doesn’t seem to be the case, however, according to the Rackspace blog.

“We are tremendously excited about the opportunity for our managed funds to acquire Rackspace,” said David Sambur, Partner at Apollo. “We have great respect for the company’s talented employees and their commitment to deliver expertise and exceptional service for the world’s leading cloud platforms. We look forward to working with Taylor and the entire management team and Searchlight to help advance Rackspace’s strategy and continue the company’s strong heritage of innovation.”

The transaction is scheduled to close in the fourth quarter, assuming standard conditions are met.

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About the Author(s)

Lynn Haber

Content Director Lynn Haber follows channel news from partners, vendors, distributors and industry watchers. If I miss some coverage, don’t hesitate to email me and pass it along. Always up for chatting with partners. Say hi if you see me at a conference!

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