DigitalOcean Holdings announced that it will acquire Cloudways, a leading managed cloud hosting and software as a service (SaaS) provider for SMBs, for $350 million in cash. This acquisition will make it easier for small to medium-sized businesses to build and grow their digital businesses.
Cloudways offers easy onboarding and daily management for certain SMBs that want to outsource their on-ramp to the internet. It helps these businesses take care of the complexities of cloud infrastructure so they can spend more time running and scaling their businesses. Cloudways is a great choice for entrepreneurs and small businesses who want to improve performance, value, support, reliability and infrastructure flexibility, and application management. It provides a unique platform that is open and flexible, with an unbeatable price-to-performance ratio and superior customer service.
By acquiring Cloudways, DigitalOcean will be able to expand its serviceable market within global SMBs. It can also increase the options for digital agencies, eCommerce sites, bloggers, freelance developers, and builders hosting on WordPress, PHP, and Magento.
“SMBs represent more than 50% of global gross domestic product (GDP) and spend $70 billion on cloud infrastructure today. With this acquisition, we are making it easier to launch, build and scale a business on DigitalOcean,” said Yancey Spruill, CEO of DigitalOcean. “Cloudways and DigitalOcean share values around simplicity, community, openness, and support that are vital attributes to how we differentiate in the marketplace. Together, we will be focused on providing a simple, easy, intuitive, and trusted platform to better serve SMBs so they can build their businesses and pursue their dreams of entrepreneurship.”
Spruill continued, “Importantly, we are excited to add Cloudways to the DigitalOcean family as they not only share our vision for the SMB market opportunity but are also a Rule of 50 business that shares our commitment to delivering compelling returns for our investors.”
“We have worked closely with the DigitalOcean team since 2014 and are now incredibly excited to officially be a part of the company,” said Aaqib Gadit, co-founder and CEO at Cloudways. “SMBs love simplicity, performance, predictability, affordability, and great support. Together with DigitalOcean, we can turbocharge our mission of helping SMBs grow through our cloud offerings.”
Cloudways is currently utilizing DigitalOcean’s infrastructure to power half of its customers. DigitalOcean and Cloudways will together be able to serve over 124,000 customers who pay more than $50 per month. This represents 84% of the pro forma company’s total revenue. The acquisition will enable DigitalOcean to expand its technology and tooling and also increase its global employee base by 30%.
Transaction details
DigitalOcean will pay Cloudways $350 million in cash to acquire them. A large part of the payment will be given over 30 months after the acquisition is completed.
Cloudways will help DigitalOcean’s revenue grow more quickly. However, it will not negatively impact DigitalOcean’s profit margin or cash flow margin outlook announced on August 8, 2022, as part of its Q2 2022 earnings release.
Cloudways is expected to generate over $52 million in revenue in fiscal 2022, with a three-year compound annual growth rate of over 50%. DigitalOcean is expecting the Cloudways transaction to close in September. They predict that Cloudways will bring in between $13 and $15 million in revenue by 2022.
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