Rackspace Continues Acquisition Strategy, Buying Competitor Datapipe

San Antonio—Rackspace is continuing to pick up its competitors a year after becoming a private company. The cloud-computing firm has acquired Datapipe, a privately held company that manages servers and public and private cloud-computing systems for customers globally, much like Rackspace.

Rackspace isn’t revealing terms of the deal, other than that it is the San Antonio-based company’s largest acquisition ever. That’s the second time this year that Rackspace has made what it calls its biggest-ever acquisition. In May, the managed hosting company acquired TriCore Solutions, which is located 26 miles south of Boston, in a deal that Rackspace said was the biggest in company history in terms of total employees and price point.

In TriCore, Rackspace acquired a company that provides IT consulting, management, and support services to large businesses, offering to update or replace anything from a company’s databases, enterprise applications for business operations, or cloud computing infrastructure.

With Datapipe, Rackspace is buying a company that has focused on a segment of the cloud computing market that Rackspace itself has increased its own efforts in: the management of and services related to public cloud tools that clients use, such as Amazon Web Services, Google, Microsoft Azure, and, in China, Alibaba Cloud.

Datapipe also has 29 data centers in nine countries, particularly in ones where Rackspace doesn’t have a strong presence, for private cloud offerings, Rackspace CEO Joe Eazor wrote in a blog post. It also is bringing to Rackspace government customers, including the U.S. Department of Defense, and large private customers, such as Johnson & Johnson, McDonald’s and Rubbermaid.

Rackspace announced in August 2016 that it would be acquired by private equity firm Apollo Global Management and its affiliates for $4.3 billion, and Apollo took the company private as a part of the transaction. In May of this year, then-CEO Taylor Rhodes left for a new job at Chicago-based software company SMS Assist and was quickly replaced by Eazor. Rackspace announced the TriCore acquisition later that month.

Datapipe was founded in 2000 and has 825 employees, according to a news release. The company is also owned by private equity: Boston-based Abry Partners. Abry invested in Datapipe in 2011 when the company closed a $176 million financing round in which Abry purchased preferred equity and a group of other lenders provided senior, secured loans. Datapipe had planned to refinance those loans in 2013, during which PE Hub says Abry gained a majority stake in the company. Datapipe raised a $236 million equity round in 2013, according to an SEC filing.

Even if Rackspace and Datapipe aren’t releasing additional details about the size of the acquisition, it appears to check out that it was indeed large. Rackspace said it is using a combination of debt and equity to fund the deal, which it hopes to have completed by the end the year. Abry is receiving equity in Rackspace as a part of the deal.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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