San Antonio technology firm acquired for $1.9 billion
A Swedish firm is acquiring San Antonio’s Pathwire, a Rackspace Technology spinoff that provides email services for businesses, for $1.9 billion in cash and stock — the largest such transaction the city’s tech industry has seen since 2016.
Pathwire is also the fourth major firm in the local information-technology and cybersecurity sectors to be snapped up by out-of-town companies in a little more than a year.
Pathwire’s buyer is Sinch, one of the world’s largest cloud communications service providers. It is paying $925 million in cash and 51 million shares of its stock for Pathwire. The acquisition is expected to close by year’s end.
Sinch is on a spree. So far this year, it has purchased two other companies — MessageMedia and Inteliquent — for a combined $2.44 billion.
Pathwire develops and markets product such as Mailgun, Mailchimp and Email on Acid to help businesses better communicate with their customers. The company, which is housed in the Weston Centre downtown, says it currently has 100,000 customers, including Microsoft and Lyft.
Pathwire was founded as Mailgun in 2010 and bought by Rackspace in 2012 for an undisclosed price. In 2017, the company raised $50 million and split from Rackpace, a cloud-computing firm.
Chicago-based private equity firm Thoma Bravo bought a controlling stake in Pathwire in 2019.
Pathwire CEO Will Conway headed the company as general manager when it was still part of Rackspace. Its acquisition this week shows the “downstream” effects of Rackspace’s 1998 founding in San Antonio, said David Heard, CEO of the local industry advocacy group Tech Bloc.
“Rackspace is the gift that keeps giving,” he said. “It underscores that impact of having wins like Rackspace that you can get these downstream wins like this for the local economy that are terrific.”
Rackspace itself was purchased in 2016 by New York private equity firm Apollo Global Management for $4.3 billion. Rackspace began selling shares on the Nasdaq exchange in August 2020, its second initial public offering.
In July, the company said it would cut 10 percent of its global workforce, or 700 employees out of about 7,000. Rackspace carried out at least half of the layoffs at its Windcrest headquarters.
A $16 billion market
After Sinch completes its Pathwire acquisition, the email company will operate as its own business segment, Sinch CEO Oscar Werner said on a conference call Thursday with stock analysts.
Sinch said the worldwide market for email delivery services is worth $16 billion.
“Any company on the planet will use email at scale,” Werner said. “That’s the significance of this channel.”
It’s expensive and complicated for companies to build their own email and communication systems, so businesses use Pathwire products to manage customer contacts, schedule and deliver emails for marketing campaigns and format emails for different platforms.
“Trying to build an email service from the ground up today is going to be close to impossible — extremely expensive,” Werner said. “And when you get there, all the other players will probably have moved four years ahead.”
Conway has said previously that Pathwire, which has 290 employees, became profitable after breaking away from Rackspace. Pathwire is expected to post $132 million in revenue and $104 million in gross profit this year, Werner said during his presentation to analysts.
Buyers’ interest in S.A.
The purchase this week follows the acquisition of San Antonio cybersecurity firm Denim Group by Colorado-based Coalfire in early June. Coalfire has not disclosed what it paid for the company.
It was the third buyout of a local network-defense company since mid-2020.
Digital Defense and GlobalScape were the other two firms recently acquired. But after those two companies were purchased, over 20 employees from each firm were jettisoned by their new owners.
“The Denim Group deal and Pathwire, clearly, are strategic-level acquisitions whereby the owners and partners and employees did very well,” Heard said.
Heard said he expects that more San Antonio technology firms will be snapped up over the next year. But he said the nearly-$2 billion Pathwire deal is “special.”
“It certainly reaffirms the idea that you can grow a large-scale, successful tech company in San Antonio,” Heard said. “We want the world outside (Loop) 1604 to understand that better.”
diego.mendoza-moyers@express-news.net
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