What Does FreedomVoice Acquisition Mean For GoDaddy?

Godaddy Inc GDDY announced it had inked an agreement to acquire FreedomVoice for $42 million in cash plus up to $5 million in potential future milestones payments. The deal allows GoDaddy to offer cloud telephony services to its SMB customers, JPMorgan’s analysts noted said in a report.

Implications Of The Deal

Offering key solutions required by SMBs is a good way to leverage GoDaddy’s huge customer base. The analysts commented that the telephony technology “occupies a good segment at the low end of the SMB market,” giving GoDaddy the opportunity to expand its presence with ~14M customers in the US and abroad.

The acquisition of strong technology enables the company to build on its existing product and leverage the added value internationally. Moreover, telephony is a is a natural add-on for the company’s core SMB market. GoDaddy has already proved its ability to sell additional services like Office 365 to its SMB customer base.

While RingCentral Inc RNG is the most notable provider of this technology to SMBs and has a strong franchise, it is better positioned for firms with more than 20 employees. On the other hand, FreedomVoice is more targeted to sole proprietaries and companies with only a couple employees, the JPMorgan report stated.

Initially, the deal may impact GoDaddy’s financials only marginally. The analysts believe the deal would not impact the 2Q16 figures, since there is a 100-day period for regulatory approval on the acquisition. There may be a low-single-digit contribution in revenue after the deal closes. The analysts said, however, that there is significant upsell and cross-sell potential, which represents a substantial opportunity to drive revenue growth.