By Alexander Bergmüller and Huang Haozhe (IE Business School), Affan Ahmed (King’s College London)
Overview of the deal
Acquirer: EQT Infrastructure
Estimated Total Transaction Size: $2.5 – $3 billion
Closed date: Q4 2020
Target advisor: Evercore
Acquirer Advisor: Goldman Sachs
On August 19, EQT Infrastructure IX, a private equity manager, has announced to acquire EdgeConnex, a leading global data center provider serving the fast-growing Edge and HyperScale solutions from Providence Equity Partners. The rumour about the acquisition has already surfaced last year in October, and it was estimated to be worth $2.5 billion. After the transaction, EQT will support EdgeConneX in expanding globally at a time when the need for data grows exponentially, driven by cloud, network, content, and new technologies such as Artificial Intelligence, 5G, Autonomous Vehicles, Virtual Reality.
The deal came amid a steady stream of dealmaking for data centers, which are benefiting as companies around the world increasingly rely on third parties to manage their data.
“EQT has followed EdgeConneX’s journey from its early years to its growth into a top data center industry player. EQT looks forward to working with the team in continuing to grow the business and identify new expansion opportunities.” — Jan Vesely, Partner at EQT Partners
Company Details: EQT Infrastructure
EQT is a differentiated global investment organization with more than EUR 62 billion in raised capital and around EUR 40 billion in assets under management (AuM) across 19 active funds. EQT funds have portfolio companies in Europe, Asia-Pacific and North America with total sales of more than EUR 27 billion and approximately 159,000 employees. EQT works with portfolio companies to achieve sustainable growth, operational excellence and market leadership.
Founded in 1994, headquartered in Stockholm, Sweden
CEO: Christian Sinding
Number of employees: 700
Total capital raised: EUR 62 billion (as of 31/08/2020)
LTM Revenue: EUR 606 million
Company Details: EdgeConneX
EdgeConneX provides a full range of data center solutions worldwide, from Hyperlocal to Hyperscale, from purpose-built to build-to-order, working closely with our customers to offer choice in location, scale, and type of facility. Delivering flexibility, connectivity, proximity, and value, EdgeConneX is a global leader in anytime, anywhere, any scale data center services for a diverse portfolio of industries including Content, Cloud, Networks, Gaming, Automotive, Security, and more.
Founded in 2009, headquartered in Herndon, Virginia, United States
CEO: Randon Brouckman
Number of employees: 160
Estimated LTM EBITDA: $125 million (as 31/08/2020)
Estimated EV: $2.5 billion
LTM EV/EBITDA: 20x
EQT Infrastructure IV is expected to be 80-85% invested with this transaction. EQT will thus actively support the development and growth of Edge ConneX in both, existing and new markets globally. It expressed its consideration of bridging or extending the fund, or by using the secondary market earlier this year. Such measures are necessary to ensure sufficient capital to keep investing. The ticket sizes for the fund typically range from between €100 million to € 600 million. EQT Infrastructure has been an active investor in digital assets. On a related note, in May, it completed the $14.3 billion acquisition of Zayo Group and its telecom and data centre networks. EQT is expected to generate substantial returns in the mid-to-longterm.
Since it was founded in 2009, EdgeConneX has built more than 40 data centers in 29 locations, most data centers are located in the United States. It currently has four locations in Europe, which are Amsterdam, Munich, Dublin, Warsaw. Demand for computing resources requires high-density power to fuel the growth in AI, machine learning, big data, and more. Many older, legacy data centers struggle to cope with the high-density power demand. This growth opportunity for hyperscale data centers, an optimized type of data centers for speed and data storage looks more attractive during the global pandemic. Burgeoning demand for public cloud services and continued strong growth in social networking have added to the urgency for increasing investment in hyperscale data centers. In addition to providing lower latency, EdgeConneX offers customers a distributed wholesale pricing model, which makes it cheaper to locate servers closer to network edge. With the help of EQT, there will continue to be substantial opportunities for EdgeConneX to continue to develop critical infrastructure to support its customers’ needs.