Entry into New Markets: The acquisition will expand Rackspace’s data center footprint by 29 server farms and provide geographic coverage where it has no data center presence, including Latin America, Europe, China and Russia. This deal comes a few months after Rackspace completed the acquisition of application management specialist TriCore Solutions in June, which was the biggest acquisition at the time.

Competitive Edge via M&A: Through their own data centers, both MSPs have strong hosting businesses and also have partnerships with hyper-scale cloud providers. While both companies are among the biggest MSPs within AWS, neither quite has the scale to compete against giants on their own. Ultimately, to remain competitive in the multi-cloud space, scale is necessary — and this acquisition will make the combined company the largest player in the managed public cloud, largest player in private clouds, and continued largest player in managed hosting.

Private Equity Benefits: Private equity firm Apollo Global Management acquired Rackspace for $4.3B in November 2016, taking the once-public company private. As a privately held firm with strong financial backing, Rackspace has been able to focus on a new strategy of attaining scale and gaining more specialized capabilities via both M&A and partnerships; Rackspace is working with Lighstream to provide custom managed Microsoft cloud solutions, for example.