Boston-headquartered Berkshire Partners has acquired a majority stake in South African data center services provider Teraco Data Environments. Permira, the previous majority owner, will continue to maintain a sizeable stake in the company. While the exact amount Berkshire spent is undisclosed, Bloomberg reported in 2018 that the company “could fetch anywhere from $600 million to $1 billion including debt in a sale” – an amount that led Africa Market Frontiers “to speculate that the amount being invested by Berkshire is one of the larger private equity deals Africa has seen for a while.”
Berkshire’s investment was on behalf of 2016’s $5.5 billion Berkshire Fund IX. The private equity investor “seeks to invest $50 million to $500 million of capital in each portfolio company and has a strong history of partnering with management teams to grow the companies in which it invests with the goal of consistently achieving superior investment returns.”
Teraco is the dominant provider of data center services on the continent – stature that made them a prime target for technology investors in Africa. The company was founded in 2008 and has since expanded in leaps and bounds, including “[multiplying] its capacity more than six times” since December 2014. The press release announcing the deal characterized Africa’s data center market as “poised for continued strong growth with increasing demand for global applications, content, and the accelerating adoption of cloud services.”
That growth potential was fundamental to Berkshire Partners’ decision to invest. Larry Hamelsky, a managing director at the firm, called Teraco “exceptionally well-positioned to capitalize on the fast growth of the Sub-Saharan data center infrastructure market given its highly interconnected ecosystems, well-designed facilities, and ability to offer a wide array of deployments.”
Teraco managing director Jan Hnizdo was equally bullish as he outlined the company’s expansion plans. “Over the next few years, we aim to double our installed critical power load from 30MW to 60MW,” said Hnizdo. “We look forward to working closely with Berkshire Partners on this ambitious growth journey.” On an increasingly-connected continent in a connected world, technology stands to offer additional investment opportunities in Africa with huge growth potential – and substantial payoff.