Category: datacenters

GI Partners’ datacenter strategy hits a new Peak (10)

Scott Denne

Contact: Scott Denne Kelly Morgan

Private equity firm GI Partners picks up Peak 10 for a purchase price that’s likely $750-850m. The final price is below where we heard it was initially being shopped, but is about two times what Welsh Carson Anderson & Stowe paid for the datacenter business in 2010.

The acquisition is GI Partners’ largest takeout of a datacenter business. The firm’s wagers in the space have ticked up since its acquisition in 2006 of Telx, which it sold five years later to ABRY Partners. The purchase of Peak 10 comes on the eve of the anniversary of IBM’s acquisition of GI Partners’ portfolio company SoftLayer for $2bn in 2013. GI bought SoftLayer in 2010 for about one-quarter of that price.

Now, all eyes will be on GI to see if it combines Peak 10 with ViaWest, which it has a minority interest in. Geographically, the two would fit together nicely and both target SMB customers with colocation plus cloud and managed services. Peak 10 is based in the southeastern US and has been steadily expanding its datacenter footprint while also adding to its services. ViaWest provides similar services from its locations in Colorado, Minnesota, Nevada, Oregon, Texas and Utah.

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Panduit’s hot for cooling vendor SynapSense

Scott Denne

Contact: Rhonda Ascierto Scott Denne

Panduit, primarily a datacenter cabling vendor, has acquired SynapSense, a datacenter infrastructure management (DCIM) software company. This is Panduit’s second acquisition in the DCIM market, which hasn’t seen much M&A overall. The company is working on providing a unified offering of datacenter technologies, with software at the center.

We forecast more than 40% CAGR for the DCIM market. Despite that growth, it is a challenging environment for small pure-play firms like SynapSense. The market is plagued by protracted sales cycles and crowded with more than 55 vendors, including several large datacenter equipment makers and enterprise IT software providers.

SynapSense brings dynamic cooling optimization software to Panduit’s asset management and monitoring offerings, which it shored up with the acquisition of Unite Technologies almost two years ago. SynapSense’s software is sophisticated and relatively mature – yet perhaps too advanced for much of the slow-to-change datacenter space.

We would expect Panduit to continue to grow its software reach via future M&A as software and services are becoming an important competitive differentiator for all datacenter equipment suppliers.

We’ll have a more detailed analysis of this deal in tomorrow’s 451 Market Insight.

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Schneider hooks into prefab datacenter market with AST buy

Scott Denne

Contact: Andy Lawrence Daniel Bizo

Schneider Electric grows from pioneer to player in the modular datacenter business by acquiring AST Modular. Schneider was early in developing modules for components of datacenters (cooling, power, etc.), though it wasn’t until last year that it embraced fully functional modular datacenters such as AST’s as part of its strategy.

The deal, a small one for Schneider, won’t have much impact on its top line. Schneider had $31.5bn in 2012 sales ($4.9bn from its IT division), and 451 Research estimates AST’s annual revenue at $15m-25m. But it does bring Schneider an installed base of 450 datacenters (including emerging markets in EMEA and Latin America), important technology (notably AST’s cooling methods), a partnership with IBM and about 70 people.

The acquisition supports our thesis in a recent long-form report : while prefabricated datacenters began as a niche, serving as an alternative in areas where custom construction is challenging or cost-prohibitive, the technology is rapidly becoming a mainstream part of the datacenter business. The prefabricated modular datacenter market is expected to grow to $2.5bn in 2015 from $663m in 2012, according to that report.

We’ll have a full report on this transaction in our next 451 Market Insight.

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Hostway hopes to rekindle growth with Littlejohn LBO

Scott Denne

Contact: Scott Denne Liam Eagle

Hostway’s sale to private equity firm Littlejohn & Co. comes in the middle of the company’s transition from traditional shared hosting toward cloud and managed services. That transition, which began in 2010, makes it a good match for Littlejohn, which has little experience in tech, but plenty in complex situations like this one.

Though terms of the deal were not disclosed, we hear Littlejohn paid roughly 7x EBITDA for Chicago-based Hostway (subscribers to The 451 M&A KnowledgeBase can see our full valuation estimate, including price, here ). That’s just under the median 8x that hosting and managed service providers have fetched this year, according to our database. The lower multiple reflects the challenges that remain for Hostway: it doesn’t have the scale of larger cloud or managed service vendors, nor does it have the high-touch services of larger hosting suppliers, and customers are increasingly opting for one or the other.

With Littlejohn’s fresh capital, Hostway can start growing the business again. While it has exceeded $100m in annual revenue (relatively rarified air in the hosting business), it dipped below that mark in the past several years as it backed off some of its international efforts. That, mixed with some customer attrition, has caused revenue to drop to about $60m in the trailing 12 months. Cowen and Co. served as financial adviser to Littlejohn, while DH Capital banked Hostway.

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Acxiom looks to sell its $271m datacenter biz, according to sources

Scott Denne

Contact: Scott Denne

Acxiom has spent the last two years separating a fragmented set of services into discrete units and sharpening its focus around the largest portion of its business: marketing data and technology services. Now sources tell us it may take the next step in separating those units by selling its IT infrastructure services business, a unit that accounts for about a quarter of the company’s revenue.

Its IT infrastructure business, which includes mainframe, server hosting and cloud infrastructure services, generated $271m in revenue over the last 12 months. The division’s sales have been shrinking as it lost customers and faced pricing pressure. Revenue is down from its most recent fiscal year (ending in March), when it brought in $275m, and from FY 2012, when it logged $292m. But the unit is becoming more profitable. In the most recent quarter, operating profit rose to $12m from $9m a year ago, with operating profit margins increasing from 12% to 18%. Acxiom’s IT infrastructure business recorded $89m in EBITDA in its last fiscal year.

Acxiom already sold off several of its other business units, including its background-screening business in early 2012 for $74m. The company’s divestitures are part of a plan to make its three separate business units – marketing data, IT services and other services – operationally independent. Axciom even separated its internal IT functions from its IT services business, likely in preparation for a sale.

Based on recent acquisition valuations, Axciom’s IT infrastructure business could fetch a price as high as $600m. Hosting companies landed a median valuation of 9.4x EBITDA in the last few years, but Acxiom’s assets will likely sell for less. Telecommunications companies have paid the highest multiples so far, but those buyers may be put off by the mainframe portion of the business, or at least value that portion significantly less. The unit’s improving profit margin make it attractive to private equity firms or sponsored companies, which have paid a median 6.8x EBITDA since 2010, according to the 451 M&A KnowledgeBase.

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