CenturyLink acquires Savvis

Tools

Top M&A 2011Deal size: $2.5 billion

Why it's relevant? Much like its acquisition of Qwest, which instantly established CenturyLink (NYSE: CTL) as the third largest U.S.-based ILEC, the move to acquire Savvis is also transformational for the telco.

Complementing the cloud and data center assets it acquired from Qwest, the $2.5 billion deal with Savvis gives it greater colocation and managed services capabilities with immediate global reach--two things the telco lacked prior to this acquisition and its previous purchase of Qwest.

While there was speculation that another service provider, including Verizon (NYSE: VZ), could have sidestepped CenturyLink for Savvis, it eventually closed the deal without incident.

By acquiring Savvis, CenturyLink now operates 48 data centers in North America and Europe, a 207,000 route mile fiber network, a 190,000 mile global access network, and a Fortune 500 and Fortune 1000 company customer list.

Rather than just gobbling up the company whole, CenturyLink decided to run Savvis as a unit in the company that integrates its hosting business and Savvis' managed hosting and cloud services into one common business unit. Based in St. Louis, the unit is led by Savvis' current management team, including CEO James Ousley.

The upside for CenturyLink is that it can now go back to existing larger multisite customers and even new customers that it may have not been able to serve before.

While large business customers are a key focus of CenturyLink's cloud play, the service provider also sees an opportunity to extend cloud capabilities to the small to medium business segment.

CenturyLink CFO Stewart Ewing confirmed such a scenario during the UBS Best of Americas conference in September.

"We feel like the one product that Savvis is missing is directionally toward the small to medium business customer base with more of a shared cloud infrastructure," Ewing said. "We're working with Savvis and think we can offer a product to offer to our small and mid-sized customers in that space as well."