KKR bets on European data center growth with new $1bn platform

Partnering with execs to build a new company from scratch is not KKR's typical playbook, but the approach made sense when it came to investing in the data center category.

KKR is building out a new data center platform as demand for data and cloud computing in Europe accelerates, Andrew Peisch, a director at the global private equity firm, told PE Hub.

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

The firm has allocated an initial $1 billion to the new initiative out of KKR Global Infrastructure Investors III, which closed on $7.4 billion in September 2018.

As the platform grows, the buyout firm may support GTR with additional equity commitments, KKR said.

The European data center market remains fragmented and consists of multiple small players, Peisch told PE Hub. KKR is looking to fill the gap by serving large cloud technology providers, the investor said.

“In Europe in particular we see a market where [there] are many different regions, and cities, and countries that all need rapid robust infrastructure development to fulfill that growth,” Peisch said.

“We feel like we have a very differentiated team and product offering focused on the largest technology companies,” he added.

KKR’s GTR has teamed up with Mercury Engineering, a European engineering contractor with deep experience in data center construction, to design and develop a data center product.

The new company plans to grow through M&A by acquiring smaller data center providers in various European regions.

GTR CEO Sodzawiczny will be joined by a number of experienced execs, including Martin Carroll, former lead director of EMEA Data Center Advisory at JLL; Mark Trevor, former partner and head of EMEA Data Center Transaction and Advisory at Cushman & Wakefield; and Tom Sodzawiczny, former associate director of capital markets at Colliers International.

For KKR, partnering with an executive team to build and scale a new company from scratch is not its typical M.O. But this this approach made sense when it came to investing in the data center category, Peisch told PE Hub.

“We spent a lot of time looking at a number of different types of transactions, including more traditional – what people think of KKR’s corporate acquisitions of large existing companies,” Peisch said.

“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.”

Action Item: See KKR’s recent form ADV.