TBP Spotlight – Rackspace Acquires RelationEdge

Rackspace
Relationedge

Rackspace Acquires RelationEdge

Deal Financials

Transaction Value ($m): Undisclosed

Transaction Overview

  • On May 17, 2018, Rackspace announced its acquisition of RelationEdge, a Salesforce Platinum Consulting Partner and digital marketing agency.
  • The transaction builds on Rackspace’s multi-cloud managed services capabilities, which has been the company’s strategic focus since its de-listing from the NYSE in 2016.

RelationEdge Reaches a Rapid Exit

  • Founded in 2013 and backed by Tide Rock Ventures, RelationEdge grew rapidly to reach over $10 million in revenue and 69 employees in 2016. Today, the company fields over 120 employees, a 33% increase in headcount over the past year.
  • In addition to being a notable Salesforce services provider, achieving Gold Partner status in 2017 and Platinum Partner status a year later, RelationEdge also focuses on providing digital marketing services. To that end, the company acquired MainPath Marketing, a digital marketing agency also backed by Tide Rock Ventures, in November 2017.
  • TBP has been closely tracking Salesforce and the ISVs and IT services companies surrounding it – read more about the M&A and investment trends in the Salesforce ecosystem here.

Rackspace Expands Its Managed Services Practice Through M&A

  • After going public on the New York Stock Exchange in 2008, Rackspace was taken private eight years later by Apollo Global Management for an enterprise value of over $4.4 billion.
  • Since then, the company has been building its multi-cloud managed services practice and pivoting out of competition with Amazon Web Services, Microsoft Azure, and Google Cloud. To strengthen its managed services offerings, the company acquired managed cloud services provider Datapipe in September 2017, raising $800 million of debt to finance the transaction.
  • With its acquisition of RelationEdge, Rackspace is further expanding its multi-cloud strategy into the application layer. The company acquired TriCore in May 2017 for its application management capabilities – TriCore derived over 80% of its revenue from managed services, and it specialized in Oracle and SAP ERPs. By acquiring RelationEdge, Rackspace has now added Salesforce capabilities to its growing portfolio of offerings.
  • As the IPO markets have opened up with technology IPOs including DocuSign, Smartsheet, Zuora, and Pivotal, Apollo is rumored to be considering taking Rackspace public again, at an enterprise value of up to $10 billion.

Rackspace’s Recent Transactions

About True Blue Partners, LLC
True Blue Partners is a boutique M&A advisory firm that serves lower mid-market enterprise software, service and solutions companies. It brings the rigorous strategic and financial perspective of bulge bracket firms with a company building approach and a steadfast partnership that only an independent boutique firm can deliver. For more information please visit www.truebluepartners.com or email us at info@truebluepartners.com.

TBP was NOT an advisor to this transaction.