Summarized below is an estimate of the relative valuations of some of the major hosting companies as of July 21, 2008.
Hostopia's recent acquisition by Deluxe looks to be about 2.8x current annualized revenue. That takes into account the large amount of cash on their books and their revenue at the time of the deal. Hostopia management also highlights to us that there is a lot of value in their platform (IP and otherwise) that should receive some allocation of the purchase price. This allocation would reduce the relative multiple to 1.8x revenues. (Thanks to Hostopia for talking through the valuation with us and updating our figures for revenue at the time of the transaction.)
As always, please feel free to contact us if you have any comments or questions.
Cheval Capital, Inc.
Enterprise Value formulas: We typically look at two formulas for calculating Enterprise Value and make adjustments from there if necessary.
- Enterprise Value = (Fully Diluted Shares * Current Stock Price) plus Debt (long and short term, including capital leases) less any option exercise proceeds for unexercised, in-the-money, options included in Fully Diluted Shares.
- Enterprise Value = (Fully Diluted Shares * Current Stock Price) less Current Assets plus Total Liabilities less any option exercise proceeds for unexercised, in-the-money, options included in Fully Diluted Shares.
The reason why we look at two formulas is that some companies have unusual balance sheet items, e.g. large cash balances, that can distort valuation.
Source of the data: All data was taken from public financial statements for the quarter ended March 31, 2008 or April 30 2008.
Disclaimer: This post is for general information purposes and is not meant to be taken as financial advice, a recommendation to buy or sell the stocks mentioned above, a comprehensive discussion of valuation or how to do the calculations discussed. Please be sure to consult your financial advisors when valuing your company, considering the sale of your business or making other financial decisions.