Website services giant Newfold Digital announced today that it has entered into a definitive agreement to acquire Deluxe’s Australia web hosting operations. The latter primarily consists of Hostopia Australia, and is the latest subject of Newfold’s ongoing consolidation play.
For those unfamiliar, Deluxe’s Australia web hosting business serves 50,000+ SMBs and hosts 250,000 websites. This not only brings more assets, brands, and economies of scale under Newfold’s growing umbrella, but it engenders global reach and geographically-diversified operations.
Meanwhile, the deal brings operational advantages to the acquired brand. That includes deeper resources and the noted economies of scale in its new parent. For example, current and future customers will benefit from a deeper bench of services, bundled pricing, and support.
“The acquisition of Deluxe’s Australia web hosting business is an extension of our commitment to support small businesses across the globe to reach their online and commerce goals,” Newfold Digital President Ed Jay told Localogy Insider. “We welcome their customers and team to our roster of industry-leading brands including our previous acquisitions in the region, CrazyDomains, and FreeParking.”
Built for Scale
To further unpack Newfold’s growth strategy and economies of scale referenced above, the company was recently assembled and built for scale. The quick back-story involves a PE-driven mega-rollup of assets from Web.com and Endurance, led by Clearlake Capital and Siris Capital.
The result is a current customer base of four million SMBs and more than 4,000 enterprise and financial customers. Web hosting is the product nucleus, but Newfold’s growth strategy is built on cross-selling. This is hoped to boost fundamentals like ARPU and retention through adjacent products.
There, the strategy is logical, as deeper ties into a given business’s operations (think: eCommerce functionality) can increase switching costs for SMBs which means greater retention. It’s also about margins, as market saturation has driven “race to the bottom” pricing for website hosting.
So with hosting margins approaching zero, smart web services companies have expanded into adjacent and synergistic services that offer better margins (and stickiness, per the above point). Fortunately, these services – everything from CRM to social media – extend naturally from web presence.
Put another way, websites are the “tip of the spear,” as they say. They’re a natural entry point to a range of related services. In addition to those mentioned above, we’re talking payment processing, SEO, and email marketing. Altogether they bring one-stop-shop simplicity and appeal for SMBs.
Expansion Arc
Back to Deluxe, the transaction is expected to close in the second quarter of 2022, subject to standard regulatory oversight and other closing conditions. That aside, this is a noteworthy move in the expansion arc of Newfold’s global footprint, and we expect more activity on that front.
“We look forward to continuing our expansion in Australia’s growing small business market,” said Jay.
