Private equity cash fuels Nordic datacentre growth

International private equity groups have scaled-up acquisition activities in the fast-expanding Nordic datacentre sector.

IPI Partners’ takeover of DigiPlex and Azrieli Group’s purchase of Green Mountain, both in July, signal a new wave of mergers and acquisitions.

Takeover interest in the Nordic datacentre industry has recently been driven by important legislative changes, particularly in Sweden and Norway.

These offer attractive tax advantages to investors, and foreign and local investors are also being tempted by access to a substantial reservoir of renewable energy, offered at prices which are among the lowest in Europe.

The acquisition of the Norway-based DigiPlex by IPI Partners underscores the growing attractiveness of Nordic datacentre assets for private equity groups augmenting their sustainable energy and green technology portfolios. Neither party disclosed the financial terms of the takeover deal.

Chicago-headquartered IPI has made over €4.5bn in total equity capital commitments since 2016 to grow its hyperscale and enterprise-focused privately held datacentre portfolios. It is now one of the world’s largest privately held datacenter portfolios, largely focused on the hyperscale and enterprise markets.

“DigiPlex is a market leader in the high-growth Nordic datacentre sector,” said Matt A’Hearn, partner at IPI. IPI’s portfolio also includes linked technology and connectivity-related assets. “[Our] existing scaled presence and deep development expertise will help us to significantly expand our hyperscale-focused datacentre portfolio in Europe, a key region of focus for IPI.”

Facility sites

DigiPlex is one of the Nordic region’s biggest operators of scalable and sustainable datacentres. It operates eight across the Nordic states, with facility sites located in Oslo, Stockholm and Copenhagen.

The DigiPlex facilities impacted by the takeover deal includes of 21,000 square metres of built infrastructure and over 400,000 square metres of land that is currently available to expand operating capacity.

A central feature of the takeover transaction is that IPI is acquiring 100% ownership in not just the publicly traded DigiPlex, but also complete equity ownership in all group-owned subsidiaries.

“DigiPlex has developed to an amazing degree in the past 20 years,” said Byrne Murphy, DigiPlex’s co-founder and chairman. “The time was right to do this deal and give the company extended firepower to capitalise on its advantages and benefit from the next wave of growth in the industry.”

In September 2021, DigiPlex secured the global information security Payment Card Industry Data Security Standard (PCI/DSS) for all of its eight Nordic datacentres, a development that advances its ability to meet the stringent anti-fraud PCI/DSS classification set by credit card brands, including the big five credit card issuers Visa, MasterCard, American Express, Discover, and the Japan Credit Bureau.

The PCI/DSS upgrade, combined with the DigiPlex Nordic Connect service, can provide businesses offering credit card payment facilities with a pan-Nordic datacentre solution, said Fredrik Jansson, DigiPlex’s chief commercial officer.

“We have had PCI/DSS certification at a number of our sites for several years,” said Jansson. “Extending this level of assurance to all our Nordic sites increases flexibility and alternatives for our customers.”

The diverse nature of investors casting acquisitive eyes over the Nordic datacentre market was highlighted in July when Azrieli Group, the Tel Aviv-headquartered commercial real estate company, launched a €755m (NOK 7.6 billion) takeover bid to purchase Green Mountain, a privately held company that operates three server farms in Norway.

The publicly traded Azrieli negotiated the purchase of Green Mountain from Smedvig, a Norwegian development company owned by the Smedvig family. The divestment by Smedvig was influenced by the magnitude of Green Mountain’s future capital needs if the company is to meet its own ambitious growth targets in Europe by 2026.

Growth rate

Smedvig viewed the takeover of Green Mountain by Azrieli as the most expedient way of accelerating the company’s expansion across the Nordic region and Europe. Green Mountain has been achieving a growth rate, in terms of income and production output, of around 50% a year since 2018. 

“Given the capital and expertise at Azrieli’s disposal, Green Mountain is now extremely well positioned to take market share in the Nordic region and beyond,” said Tor Kristian Gyland, CEO at Green Mountain.

Based on its growth trajectory since 2018, the Nordic datacentre market has the potential to grow from a projected 170-MW in 2021 to over 900-MW in 2026. In the case of Norway’s green energy capacity, 100% of the domestic datacentre industry’s future sustainable power needs can be met by long-term contracts from local renewable energy producers.

The Nordic acquisitive trail is also expected to impact actors delivering technical solutions to datacentres. Asetek, a Danish provider of sustainable datacentre solutions, is looking at growth options, including acquisitions and organic investments. The company’s datacentre business segment focus was sharpened in September, after it exited from the High Performing Computing (HPC) niche market 

The decision was taken to protect Asetek’s future profitability from increasing capital investment demands in the HPC market domain, said Andre Sloth Eriksen, Asetek’s CEO.

“The exit from HPC gives Asetek a clear strategy to profitable growth,” he said. “Our HPC segment burned cash without generating meaningful returns. Exiting was the logical move.

“We will pursue a focused approach to growing our position in the general datacentre market. The strategic plan is to deliver sustainable datacentre solutions by capitalising on the our liquid cooling technology while boosting long-term investments in the data center business segment.”