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VSS doubles money in web hosting exit

The firm has sold web hosting business Hostway, a 2010 investment from its second structured capital fund.

Veronis Suhler Stevenson and an investor group have sold web hosting company Hostway to Littlejohn & Company for an undisclosed sum.

A return multiple was not disclosed, but a source familiar with the matter said the exit generates a 2x return for VSS. Hostway provides cloud hosting and other web hosting products to more than 500,000 customers worldwide.

VSS led an investor group that initially invested $100 million in Hostway in 2010, with VSS investing from its Structured Capital II fund, a $312 million mezzanine fund that closed in 2009. Fund II and its 2005 predecessor, VSS Structured Capital I, are producing gross IRRs of 20 percent and 25 percent, respectively, and net IRRs of 14 percent as of 30 September, according to an industry source.

VSS is expected to come to market with its next structured capital fund in 2014, the source said. VSS declined to comment on its fundraising plans.

In addition to its mezzanine funds, VSS has raised four buyout funds, all of which are fully invested, according to Private Equity International’s Research and Analytics division. The firm is targeting $1 billion for its VSS Communications Partners V fund, according to PEI data.

VSS invests in lower mid-market companies in the information, business services, healthcare IT, education, media and marketing services sectors in North America and Europe. Recent investments in the web hosting sector include a growth capital investment in May in Netherlands-based IT-Ernity, which provides web hosting products to small and medium-sized enterprises.

In January, John Suhler stepped down as president of Veronis Suhler Stevenson, which he co-founded alongside John Veronis in 1981.

VSS has managed committed capital exceeding $3 billion. The firm has invested in 74 platform companies and made more than 330 add-on acquisitions.