Last week, news emerged that some more infrastructure assets might be up for sale. Cologix, which has spent the last five years consolidating tier 2 data center and interconnection assets, is said to be considering a sale.
It was just over five years ago that private-equity-backed Cologix kicked off its model, starting out with a set of eight Canadian data centers in Toronto, Montreal, and Vancouver plus one in Dallas. Since then they've acquired similar assets across the country, with the larger most recent deals being for Colo5 in 2014 and Net Access in New Jersey a year ago. They have 24 data centers in all, a portfolio that is said to be worth somewhere in the $1.25B range.
Cologix's possible sale probably reflects two things: the fact that for private equity this is about the normal lifespan of an investment like this, and the fact that data center asset valuations are quite strong. There are plenty of people out there who have been working on monetizing their data centers, especially network operators like Windstream and CenturyLink who have decided to shift their focus a bit. But there are even more potential buyers out there who like data center assets because they understand them and the underlying business model and its cash flows. It's a good time to cash in.
So who would buy Cologix? Other private equity buyers could simply step in and keep the status quo, but I think the more likely option is another existing private-equity-backed strategic buyer that is interested in expanding into new markets. I'm thinking of companies like Infomart, vXchnge, DataBank, 365 Data Centers or Netrality. I think it's less likely that Equinix or Digital Realty would bid as aggressively for assets beyond the usual tier-1 markets, but you never know. But perhaps the best candidate could be Zayo, for whom the Cologix model is a very smooth fit with their zColo business, including the assets up in Canada.