KKR sets aside $1bn to muscle in on European data centre market

US investment firm KKR has outlined vague plans to fuel growth in the European data centre market with $1 billion for a build-to-suit and roll-up acquisition data centre platform.

While it is difficult to translate the overly enthusiastic PR and marketing language which dominates the press release, it does appear to be an effort to build more data centres in the European region.

“The data centre market in Europe presents a unique opportunity to invest behind the secular trend of increased cloud services adoption and demand for data,” said Waldemar Szlezak, MD of KKR.

The new company, which will be known as Global Technical Realty (GTR), will operate in two ways. First, a build-to-suit programme for the major cloud players. This segment will presumably have an anchor tenant dictating the location, before selling services on to additional cloud players.

Secondly, the team plan to execute a ‘roll-up’ acquisition strategy, a particularly effective business model when economies are facing tough trading conditions. This is a simple, albeit slightly predatory strategy, effectively identifying distressed assets for acquisition, before merging together in a single operation to benefit from scale.

“We are thrilled to have found an investor like KKR that shares our vision for the future of the data centre market,” said GTR CEO and founder Franek Sodzawiczny.

“KKR’s breadth of resources and tremendous expertise will allow GTR to fully participate in this growing market and provide a solid foundation for GTR’s future growth and success.”

Ultimately, KKR and GTR are attempting to capitalise on momentum towards the cloud. The major cloud players have their own data centre footprint of course, which is rapidly expanding, but there is only so much which can be done alone. The built-to-suit programme releases some of the risk associated with data centre investment, while the roll-up acquisition strategy is a quick win for a cash-rich company looking to muscle in on cloud momentum and create an immediate presence.

Today, trends are only heading in one direction. With more companies digitising business processes and workloads, the cloud computing segment is certainly benefiting from societal lockdowns and enforced digital transformation programmes. The big question is how many of these programmes will be returned as the world returns to some semblance of normality.

When we asked Telecoms.com readers how many thought their employers would retain remote working practices 50% said they would have to check into the office once or twice a week and 34% believed they would given the option to work as they please.

It does appear the enforced remote working dynamic has some sustainability in the long run, perhaps kick-starting a wider transformation programme. Nicholas McQuire, SVP and Head of Enterprise Research at CCS Insight told us there has been resistance to the cloud from traditional companies in the past, though once started it should provide a catalyst for greater things.

Aside from these very immediate and unusual drivers for cloud, trends have of course been gradually heading towards a more digitised and distributed world. Netflix, as an example, is very interested in caching as much content in edge data centres, to improve experience for customers, while cloud gaming could also provide greater demand for data centres.

Not only is the world become more digitised, super data centres will have to be supplemented by additional infrastructure to create a distributed cloud. This is an important element to reduce latency and remove choke points when attempting to improve customer experience.

The world is only heading in one direction though the pace of change is unknown for the moment. COVID-19 might have acted as an accelerator for digital transformation, and while this might only be temporary, this is an excellent time for KKR to be throwing money at data centre infrastructure.