Halyard Capital has formed Digital Fortress, a new data center co-location platform and has completed its first two purchases with the acquisitions of digital.forest and Fortress Co-location Services. Digital Fortress will serve as a platform for consolidating the highly fragmented data center marketplace in the Pacific Northwest and for select organic new data center build or refurbishment opportunities.
The strategy of Digital Fortress will be to capitalize on the underserved market of small to medium sized enterprises seeking to enhance their overall IT infrastructure capabilities through outsourcing with co-location service providers. The company is currently evaluating the refurbishment of an existing data center space located in downtown Seattle, which would provide Digital Fortress customers with multi-site data center redundancy and increased growth capacity. The company is based in Seattle, WA (www.forest.net).
Halyard has identified the following trends to support its data center consolidation strategy: IT supply/IT demand imbalance; growth in IT outsourcing; growth in Internet traffic and bandwidth demand; and an increased focus on disaster recovery and regulatory demands.
Halyard has been proactively pursuing investment opportunities within the IT Infrastructure & Services sector. The firm has experience with data center infrastructure and IP networking solutions businesses, having previously been an investor in Inflow Communications, which managed data centers that provided co-location services and other value-added network services. Halyard sold its investment in Inflow Communications in January 2005 to Sungard Data Systems.
“During the past few years, we have seen increasing demand in the market for high quality, power dense co-location services, driven by significant growth in digital information and enterprise migration towards IT outsourcing, as well as fundamental advancements in computing technologies, which Digital Fortress is uniquely positioned to deliver,” said Robert Pistilli, Vice President at Halyard Capital.
Halyard is partnering with Meritage Funds and Sweetwater Capital in forming Digital Fortress, with Mark Hughes, former Chief Financial Officer of Inflow Communications and Executive Vice President of Operations at SunGard Availability Services, serving as Executive Chairman.
“Digital Fortress will differentiate its service offering by delivering high-density power applications serviced with a highly efficient and effective operating model,” said Mark Hughes. “We believe this model will deliver best-in-class infrastructure solutions comparable to nationally recognized competitors, but at a more attractive value to customers.”
Halyard Capital is a New York-based private equity firm with over $600 million of capital under management, focused on investing opportunities within the media, communications and business services industries. Halyard specializes in middle-market leveraged buyouts and growth equity investments (www.halyard.com).
“Meritage is pleased to re-enter the data center market with the establishment of the Digital Fortress platform and to reconnect with Mark Hughes, Halyard and Sweetwater in the process. We have great confidence in this team’s ability to serve the needs of Digital Fortress’ growing base of true enterprise customers,” added Derek Pilling, Managing Director at Meritage Funds.
Meritage invests in technology services businesses. The firm manages three investment funds representing more than $600 million of committed capital and is currently investing Meritage Fund III. Meritage was founded in 1998 and is based in Denver, CO (www.meritagefunds.com).
Sweetwater Capital is a family office private equity fund led by William Marraccini. Sweetwater invests primarily in communications infrastructure service businesses. The firm was founded in 2005 and is based in Red Bank, NJ (no website found).
Webster Bank provided debt financing for the transactions. digital.forest, Inc. was advised by Media Venture Partners.