Blackstone, Bain, TCV, Insight dig deep into growth equity operations, KKR bets on European data center growth with $1bn platform, Capital calls rise and fall as investors gauge the market

Good morning, Tech Take Readers.

I wish I could say “Happy Wednesday”, but after #BlackoutTuesday, it hardly seems appropriate. This weekend our Brooklyn neighborhood was full of people enjoying the sun, but just a few neighborhoods over, protesters were met with violence. The world is constantly reminding us that the time for change is now.

Growth Equity
I have a deep dive read for you today. With fewer traditional M&A deals happening, I wanted to take a step back to share what the masterminds of growth equity are up to. While my conversations with prolific investors in growth began in February, we reconnected more recently to talk strategy, differentiation and value-add approaches in the downturn.

Before covid-19, technology growth was experiencing one of its strongest eras ever, with $25.1 billion pouring into the strategy last year alone. Now GPs are working hard to find ways to extract value beyond financial engineering, finding a playbook that will change the way the industry approaches growth.

One of the biggest problems with growth equity in the technology sector over the last decade has been the reliance on trend picking, GPs told me. That approach worked while technology as an asset class was experiencing outsized growth.

But now, the strategy has gotten much harder, Blackstone Group’s Jon Korngold said. “Everyone in growth equity has looked smart because virtually all strategies have worked over the past decade. If you further increased your bets to include emerging markets and China, you looked like a genius. This strategy of making a bunch of passive bets while all boats rise is good until it’s not,” he says.

For insights from Korngold, Bain Tech Opportunities’ Darren Abrahamson, Insight Partners’ Ryan Hinkle and TCV’s David Zhang, check out my full story. Write me with your thoughts and feedback at mvinn@buyoutsinsider.com.

Data Rush
KKR this week committed $1 billion to building a data center platform in Europe to exclusively serve hyperscale cloud providers.
What immediately stood out to me was the fact that KKR chose to partner with an experienced executive team to build the business from scratch. Known for large acquisitions of established businesses, that’s not the buyout firm’s typical playbook.

The new venture, Global Technology Realty, will be led by Franek Sodzawiczny, former founder and CEO of Zenium Data Centers and co-founder and CDO of Sentrum.

I spoke to Andrew Peisch, a director at KKR, who said KKR examined many different potential data center transactions – including through deal structures for which it is most known.

“When we stack together the GTR management experience and the business opportunity, it feels very much like we are investing in a credible experienced business,” Piesch said.

Demand in cloud computing and data continue to grow across the world, especially during a remote-everything environment. The European data center market also offers an opportunity to go big, sources told me.

“The European market is fragmented, less competitive and offers a good enterprise grade addressable market,” a senior TMT banker said in a recent conversation.

The KKR team and the founding CEO, Sodzawiczny, already had success with two infrastructure businesses. Sodzawiczny previously founded two British colocation providers: Sentrum, which was sold to Digital Realty for around $1 billion in 2012, and Zenium, which was acquired by CyrusOne for $442 million in 2017.

Top Scoops
Capital calls hiked up to unprecedented levels in the early days of the downturn, but for some LPs they quickly dissipated. GPs were calling down capital to pay off extant credit lines, it seems, but fewer have been pulling in money for new deals.

“Since that time, we’ve seen capital calls fall off a cliff,” Texas Municipal Retirement System Director of Private Equity Tom Masthay told Justin Mitchell on Buyouts. “I literally have nothing that is waiting to be funded right now for the next two weeks. And we have $2 billion in uncalled commitments, roughly.”

Read it here on Buyouts.

MiddleGround Capital acquired Supra Alloys and EDGE International, distributors of metal bar, plate and sheet products. The seller was Titan Metal Fabricators. MiddleGround is combining Supra Alloys and EDGE International with existing portfolio company Banner Industries, which the firm acquired in December 2019. Read the news brief here on PE Hub.

Have a great day! Hit me up with your thoughts at mvinn@buyoutsinsider.com.