Rackspace is making some big steps this week. The managed cloud computing firm has announced plans to acquire Datapipe, a New Jersey-based cloud Startup. Financial details of the deal were not disclosed, but Rackspace CEO claims it is the largest deal in the firm’s history.

According to TechCrunch, Rackspace has announced plans to acquire rival managed public cloud service company Datapipe. The deal is expected to strengthen Rackspace’s position in the hotly contested managed cloud computing market.

What the deal means for Rackspace and the market

The deal is expected to bring a string of new capabilities and market benefits to Rackspace. These include deep experience and knowledge in Microsoft Azure, VMware, OpenStack private clouds, Google Cloud platform, and managed services for enterprise applications such as those in Oracle and SAP ecosystems.

But the most significant gains, according to some analysts, came from Datapipe’s huge presence in the market. Datapipe’s customers include big government agencies and sectors such as the US Department of Defense, US Energy Department, Treasury Department, UK Cabinet Office and more.

In addition to strong market grip, Datapipe also has data centers and infrastructure in key markets where currently Rackspace doesn’t have much of a presence.

These include the fast-growing markets of China, Russia, and Brazil. Datapipe also has managed service deal with the China’s Alibaba Cloud. Another big gain, Rackspace will also gain access to the startup’s colocation services and professional services.

The deal is the latest step in Rackspace’s ongoing effort to expand beyond its core managing cloud services.

The company has recently launched its new Global Solutions and Services (GSS), which reportedly aimed at delivering cloud professional services.

As mentioned earlier by TechCrunch, the two companies still have wait for government’s regulatory approval and some of the details of what the combined company will look like remain unclear clear.

According to Silicon Angle, the combined company will have around 6,700 employees and generate an estimated $2.4 billion in sales.

About the target company

Founded in 1998 and based in New Jersey, Datapipe provides IT managed solutions for managing and securing mission-critical IT services, including infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), cloud computing, data centers, and collocation.

The New Jersey-based company has a significant cloud computing presence in the market. The startup has cloud infrastructure capabilities in Silicon Valley, the New York Metro area, London, Hong Kong, Shanghai, and even in Moscow, Russia. The company also opened an additional office in Singapore to deal with the growing demand in the cloud market.

A Microsoft Gold certified partner and member of the PCI Security Standards Council, Datapipe offers managed services for AWS (Amazon Web Services), which include Amazon Elastic Cloud Compute (EC2), CloudFront, Amazon Simple Storage Services (S3), and Amazon Relational Database Services (RDS).

The company provides application management, professional services, security services, and cloud hosting services for mid to large-sized companies. Some of the services it provides include cloud monitoring, diagnostics, custom application management, remote infrastructure management, and enablement of software-as-a-service (SaaS) to the independent software vendor.

The company provides IT services to a range of vertical industries, which include the healthcare, financial sectors, pharmaceutical, manufacturing and distribution, publishing, communication, business services, public sector, government, and technology industry.

Before its deal with Rackspace, Datapipe had raised a total of $487.36 million in venture capital fund from its three funding rounds (2008, 2011, and 2013). The company’s investors include Brown Brothers Harriman, CapitalSource, Caterpillar, CIT Group, GE Capital, Goldman Sachs and TD Securities, according to CrunchBase.

About the acquirer

Founded in 1998 and based in San Antonio, Texas, Rackspace is a managed cloud computing company. Rackspace also has offices in UK, Australia, Switzerland, The Netherlands, India, Hongkong, and Israel. It also operates data centers in Illinois, Texas, UK, Australia, Hongkong, and Virginia.

The company made its IPO (initial public offering) in 2008, and in 2016 it was acquired by Apollo Global Management for $4.3 billion. That deal was completed in November 2016 and Rackspace was taken private. The company has also ended trading in the US stock market.