Yahoo’s business unit Edgecast has been acquired by Limelight Networks for approximately $300 million in an all-stock transaction. The merger will establish a worldwide edge-enabled software solutions provider with pro forma sales of more than $500 million in 2021 across cloud security and web applications, content distribution, and an edge video platform.
Limelight Networks will rebrand as Edgio in preparation of the merger, with the merged firm continuing to operate as Edgio when it closes. Edgio will be a solutions provider for organizations that aim to offer a fast, secured, and frictionless digital experience to end-users. Edgio will offer clients a distributed edge platform with a focus on security and connectivity at global scale.
Edgecast is a Yahoo division that is owned by funds managed by Apollo (NYSE: APO) affiliates and Verizon Communications (NYSE: VZ). Apollo has approximately $498 billion of assets under management.
“By uniting Limelight and Edgecast, we are building a powerful application, content and video edge enabled solutions company that delivers improved customer performance, productivity and security for the outcome buyer,” said Bob Lyons, Chief Executive Officer (CEO) at Limelight Networks. “Together we have a strong value proposition to serve the fast-growing, yet fragmented edge solutions market and our combined capabilities will accelerate our ability to capture more share of this high growth $40 billion total TAM. In six short months we have taken our TAM from $12 billion to $40 billion and with the acquisition of Edgecast, we are further accelerating and solidifying our ability to be recognized as a leader in edge software solutions for the outcome buyer.”
Global Network Capacity: 200Tbps
With a worldwide network capacity of more than 200Tbps and more than 300 PoPs, the merged firm will deliver edge enabled solutions globally with natively integrated cloud security, edge video platform, and web applications to support the next generation of client demands.
Amazon, Coach, Disney, First Republic Bank, HBO Max, Hulu, Yahoo, British Telecom, Verizon, Microsoft, Peacock, Sony, TikTok, and Twitter are among Limelight and Edgecast’s current diversified customer base, which includes Fortune 100 companies as well as some of the world’s leading technology companies, streaming services, and most visited websites, including Amazon, Coach, Disney, First Republic Bank, HBO Max, Hulu, Yahoo, British Telecom, Verizon, Microsoft, Peacock, Sony, TikTok, and Twitter.
Through expanded capabilities, portfolio targets, and new opportunities across OTT video, cloud security, and enterprise secure access, in addition to existing content delivery and web applications solutions, the transaction is expected to accelerate Limelight’s ability to serve its total addressable market of approximately $40 billion.
$502M in Combined Sales
In 2021, the two firms combined made $502 million in sales. In 2021, Edgecast earned $285 million in revenue, with roughly half coming from high-growth, high-margin products and 97 percent coming from recurring income from a highly complementary client base with no Limelight overlap. Limelight’s yearly revenue is projected to more than quadruple as a result of the merger, which would also boost gross margin, recurring revenue growth, and revenue diversification among important clients.
Limelight’s web application division would benefit considerably from Edgecast’s multi-layered cloud security technology, which is expected to generate more than $100 million in revenue. These solutions will provide a comprehensive cloud platform for web applications and APIs that would help improve digital asset performance, application consumption speed, application security, and developer productivity and capability.
The $300 million purchase price suggests a 1x acquisition multiple for Edgecast’s revenue in 2021. The merged business estimates $50 million in annual cost reductions, including $30-35 million in decreased colocation and internet peering costs, as well as $15-20 million in operational expenditure savings. Limelight has set a long-term strategic aim of 20-25 percent revenue growth, 60 percent gross margin, and 15-20 percent adjusted EBITDA margin based on predicted revenue and expenditure synergies.
“At Yahoo, we are focused on driving value creation for our business and customers,” said Jim Lanzone, Chef Executive Officer (CEO) at Yahoo. “By spinning off Edgecast to merge with Limelight, the new company will immediately become the leader in the massive and growing edge solutions market. I am confident in the value and strength of this combined company, and the growth it will drive for Yahoo, Edgio and Apollo.”