GoDaddy's Acquisition of HEG and What this Means to Godaddy's Share Price and Google

April 26, 2017

After expressing their intention to join forces back in December of 2016, GoDaddy and HEG have finally completed the acquisition process in April of 2017.

GoDaddy is a staple in the web hosting community, and its services help millions of aspiring online entrepreneurs, web designers, and online businesses bring their dreams to fruition.

 

On the other hand, HEG (Host Europe Group), is also a notable web services provider.

In fact, the acquisition, which cost GoDaddy a staggering $1.82 billion, will help the resulting corporate outfit gain access to more than 16 million customers.

 

HEG has quite a strong presence in Europe, which means GoDaddy will considerably broaden its market reach with this acquisition, which also happens to be the biggest in its history.

Less than a decade ago, HEG was worth a lot less. In 2013, the company was purchased for 438 million by Cinvens. Since then it grew considerably through several acquisitions of its own.

 

What does the acquisition mean?

Because of this acquisition, customers of the two companies can expect more value from the services they get. Other perks will include having broader access to innovative web solutions. GoDaddy has been around since the 90s. From now onwards, it will replace the HEG brand, although the European brand will continue to offer its services in its current markets.

 

Impact of the acquisition on GoDaddy’s stock price (NYSA:GDDY)

Although GoDaddy wanted to offer its shares to the public through an IPO way back in 2006, it was only able to achieve this dream in 2015 in an IPO that saw the company sell its shares on April first for $26.50 each. The initial plans for an IPO were shelved after it became apparent that the market conditions were not ideal in 2006.

After the 2015 IPO, the share price rose in value to reach $36.40 by October of the same year.

 

Towards the end of last year, when the public was made aware of GoDaddy’s plans to make the biggest acquisition in its history, the price of its shares took a hit and dropped to $31.80.

But this would soon change because the acquisition made the share price rise in value to get to $38.83 on 26 April 2017.

The stock price has been going up.

Godaddy's Share Price 26 April 2017

 

Some concerns associated with the acquisition

With this acquisition, GoDaddy might have quite a bit on its plate. The extra management effort needed to integrate HEG into its operations might require it to make cutbacks in other areas. Consequently, its operations in Asia might take a hit, which is too bad because the company is currently enjoying great growth in the region.

The company’s profitability is also a concern. Although the company was able to make a profit in the last quarter, it typically reports losses.

 

Unfortunately, this profitability streak might not last long since the company is facing stiff competition in all of its major business segments from companies like Neustar (NSR), Web.com Group (WEB), and Wix.com (WIX) or smaller players like Domain.com who specialize in domain name registration, shared hosting, vps hosting and ssl certificates.

 

What the acquisition means for Google

In the last few years Google was given authority to become an authorized domain registrar. That put the technology behemoth in direct competition with GoDaddy.

Google would have a lot to gain by taking over GoDaddy. As things are, GoDaddy already uses Google Ads on parked domains. AdSense on Godaddy’s parked domains is a big revenue stream for Google. If that business ended up in Yahoo’s hands, Google would lose out quite a bit.

 

Other reasons Google would want GoDaddy include the fact that it would gain access to lots of domain data. And with GoDaddy’s recent acquisition of HEG, it has become an even more attractive target for Google due to web services company's broader global presence.

 

If that is the case Google could make an offer sooner rather than later as Godaddy’s share price is climbing up!

Path Not Found

Alex Papaconstantinou

In 1999, as a young college graduate, I got my first job at Nortel Networks making the World Wide Web. In 2004, at Seagate Technologies I worked to satisfy the demand for faster and more reliable hard drives.

Since 2008, I have been the founder of several other online ventures. Recently, I graduated from the university of Hard Knocks with a master of Arts degree in Web Business. Currently, I am doing my PhD (Positive, Hungry and Determined) in Online Business. I have no plans to complete this.

I created Webhostingology to help other internet entrepreneurs get the right webhosting solution and save money.