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J2 Global looks to acquire Veeam partners

The Veeam partner ecosystem includes a multitude of small firms, which has created an acquisition opportunity for J2 Global, a cloud services and digital media firm.

J2 Global, a cloud services and digital media company, plans to acquire service providers in the Veeam backup and recovery ecosystem in a bid to build a larger customer base and drive operational efficiencies.

Dan Timko, chief strategy officer at J2 Global, based in Los Angeles, said discussions between the company and acquisition candidates are underway. He said he sees an opportunity for J2, given the thousands of Veeam Cloud & Service Providers (VCSPs) in the market.

"If you look at the market, there are a few bigger players, ourselves included, and a long tail of smaller partners," Timko said. "We think we are moving forward into a time where it is going to be much harder for small providers to effectively differentiate themselves."

He said J2 wants to acquire companies in their entirety or conduct carve-out acquisitions, in which J2 would purchase only the portion of a business involved in Veeam backup. J2's acquisition plans are global in scope, he added.

Timko said VCSPs face a hefty investment as their backup and recovery businesses grow. Stepping up to "the next larger storage array is a pretty big outlay for a lot of companies," he said. And the return on such an investment won't be immediate, since it could take several months or longer to fill a 100 TB array, depending on the customer growth rate, Timko noted.

If you look at the market, there are a few bigger players, ourselves included, and a long tail of smaller partners.
Dan TimkoChief strategy officer, J2 Global

Deals with service providers could be structured in a variety of ways. If J2 acquires a Veeam partner with a strong brand, it may "continue to leverage" that brand, Timko said. Other companies may be folded into one of J2's existing brands. One such brand is KeepItSafe, a Los Angeles-based VCSP that offers cloud backup and disaster recovery services.

Another variation would involve companies that sell their Veeam line of business to J2 and become a reseller of J2's services, while keeping their original customers under contract.

J2's Veeam partner acquisition initiative follows venture capital and private equity firm Insight Partners' agreement to acquire Veeam for $5 billion. That deal, disclosed earlier this month and expected to close in the first quarter, would make Veeam a U.S. company. Veeam is currently based in Switzerland but will establish a headquarters in the U.S. Insight's financial backing could help Veeam further expand in the U.S. market.

Timko noted the potential for a stronger focus on the U.S. market. He thinks the pending acquisition could also help Veeam make a stronger play in the larger business market. "They are going to start moving up," he said.

The upmarket direction would create opportunities for J2, Timko said, noting J2 would have an advantage working with bigger customers as a large business itself. J2 had 2018 revenue of $1.2 billion.

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