Rackspace Purchased By Private Equity Firm Apollo Global Management And Goes Private

Rackspace has been purchased by Apollo Global Management LLC, a private equity firm, for $4.3 billion or $32/share. The purchase of Rackspace, a public Infrastructure as a Service company headquartered in San Antonio, TX famous for its fanatical customer support and managed hosting capabilities, reflects Rackspace’s inability to compete with the likes of Amazon Web Services, Microsoft Azure and the Google Cloud Platform. In response to increased competition within the IaaS space, Rackspace transformed its business model to ensure its services were supported Amazon Web Services, Microsoft Azure and the Google Cloud Platform but it nevertheless found itself unable to carve out an anointed place for itself within the landscape of IaaS players despite its early entrance into the IaaS market. Rackspace’s acquisition by Apollo Global Management LLC represents a milestone in the history of cloud computing by affirming the dominance of IaaS cloud market share by Amazon Web Services and the concomitant challenge of carving out a niche within the IaaS space. The industry should expect greater consolidation within the IaaS space over the next 24 months as the ascendancy of Amazon, Microsoft and Google with respect to infrastructure-related cloud services soars and renders it increasingly difficult for smaller players to compete, particularly given their ability to drop prices and enrich their infrastructure as a service offerings with big data, data analytics, cloud monitoring and security solutions.

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