Imagine acquiring a business that not only suffers from falling revenues and profits but has no financial or performance data you can analyse. That’s what Carlyle Group faced when it spun Telvent Global Services out of Schneider Electric in 2015.
When the global private equity giant invested in Spain-headquartered Telvent, an IT infrastructure management business with data centres across the Iberian peninsula, the business had no standalone finance, tax, legal, human resources or property management functions. The firm, which used its €656.5 million Carlyle Europe Technology Partners III fund to invest in the deal, had to build all these functions from scratch.
Carlyle rebranded the business to Itconic and set about strengthening the management team, including adding a chief executive, new chief financial officer, two senior executives and former Telecity chief executive Mike Tobin as a board director.
One of the key elements in Carlyle’s value creation story was the increase in products. Carlyle developed a cloud exchange point allowing connectivity with Amazon Web Services – the online retailer’s massive on-demand cloud computing platform – as well as Microsoft’s Azure. In addition to adding major regional internet exchanges to Itconic’s portfolio, the firm acquired CloudMAS, an AWS reseller for Spain, and expanded its offering to cover Azure and Google Cloud as well as offering a full suite of hybrid cloud products as part of a single platform.
One of Carlyle’s priorities was to refocus and invest in Itconic’s core data centre unit, which had strong telecommunications connections in the Iberian peninsula but which had been suffering from neglect. The private equity firm worked with the newly implemented management team to increase capacity at the Barcelona, Madrid and Lisbon data centres and focus on “high-end connectivity-driven customers”. It was this element that boosted Itconic’s market position to one able to compete with global players.
In just over two years, Carlyle had transformed a business with falling revenues and profits to one that delivered strong underlying topline revenue and EBITDA growth.
In 2017 Carlyle agreed to sell Itconic to internet services firm Equinix for €215 million. The deal marked the first exit from CETP III and media reports at the time noted the firm made a seven times return on its investment. The business now operates the largest network of data centres in Spain and Portugal.
Fernando Chueca, managing director in the European technology team, said: “The acquisition of Itconic by Equinix for €215 million only two years after the original acquisition by Carlyle was a testament to the substantial changes made in the business through a combination of improved strategic focus, attracting leading international customers to the business and delivering additional investment into cloud technologies.”
Katja Salovaara, OpEx judge and senior private equity portfolio manager at Finnish pension insurance firm Ilmarinen, describes the Itconic deal as a spinout from a corporate that was “completely transformed” from a business with falling revenues and profits to strong growth. “The refocusing and investment in the core data centre division paid off with securing global marquee cloud customers.”