M&A: Starwood Capital Acquires 50% Stake In Echelon Data Centres

Starwood Capital Group has acquired a 50% stake in Echelon Data Centres, a sustainability-focused data center infrastructure provider in Ireland and the United Kingdom. The investment, involving roughly US$850 million, gives Echelon an enterprise value of roughly €2.5 billion (US$2.7 billion).

This is M&A deal number 103 that Sustainable Tech Partner has covered so far in 2024. See all M&A deals involving sustainability, climate tech and green IT services listed here.

The Starwood-Echelon deal reinforces steady venture capital and private equity activity in the data center arena. The data center providers, in turn, increasingly leverage renewable energy to scale their infrastructure for artificial intelligence (AI) applications and other heavy workloads.

Starwood Acquires Echelon Data Centre Stake: Investment Details

Echelon, founded in 2016, has 140MW of capacity that is either operational or in late-stage construction as of mid-February 2024. The data center provider focuses heavily on sustainability and renewable energy. Indeed, Echelon endorses the concept of direct power purchase agreements (PPAs) with wind or solar farms.

Moreover, the company's mission is to "provide essential data centre infrastructure sustainably and ethically, recognising our responsibilities to the people and partners we work with, the communities where we operate, the society we are a part of, and the planet we all share." Still, we don't know the data center company's carbon footprint or specific net-zero greenhouse gas (GHG) emission goals.

Meanwhile, Starwood Capital is a private investment firm focuses global real estate. The company since 2019 or so has committed roughly $8 billion of capital to develop data centers across the United States and Europe. More recently, the firm in January 2024 launched Starwood Digital Ventures to focus specifically on data centers. The effort will involve data-center buildouts as well as partnerships with best-in-class data center operators, the company said at the time.

Starwood Acquires Echelon Data Centre Stake: Executive Perspectives

Numerous executives weighed in on the deal with prepared statements.

In a prepared statement about the investment, Lorcain Egan, co-head, Europe, Starwood Capital Group, said: "Starwood Capital is delighted to announce this investment in Echelon. It is a testament to the business the Echelon team has built since 2016 to establish a leading European data centre platform. Echelon has been delivering critical infrastructure to support the growth of some of the world's most dynamic technology companies and we look forward to continuing to partner with them in that mission. For Starwood Capital, this significant and strategic investment continues our long-term focus and capital deployment into a core sector for our European business."  

Added David Smith, managing director and head of data centres, Europe at Starwood Capital, added: "We are incredibly excited to continue our long-standing relationship with the Echelon team and to support the accelerated growth of its business. This investment builds on our expertise and track record in the sector, including our recent launch of Starwood Digital Ventures, a platform dedicated to our growing global data centre investment strategy."

Noted Barry Sternlicht, chairman and CEO of Starwood Capital: "Data centres have been a core thematic for us in the United States and Europe over the last five years and we are delighted to grow our portfolio in a key sector with strong tailwinds. This transaction materially enhances our data centre footprint and capabilities in Europe. We are confident that with the Echelon team and Starwood Digital Ventures we will continue to find further opportunities to deploy capital into transactions with attractive risk adjusted returns for our investors, both in Europe and the United States, where we have an additional 600MW of projects in our pipeline, bringing our total global platform to ~1.5GW."

Observed Niall Molloy, CEO & founder of Echelon Data Centres: "We are very pleased to enter into this transaction with our long-standing partner, Starwood Capital. Starwood Capital's scale, access to capital and track record position Echelon incredibly well to service our customers' growth requirements on a global basis. We look forward to the continued growth of the business and expansion into new European markets and beyond."

Concluded Trevor Whelan, chief investment officer (CIO) of Echelon Data Centres: "Today's announcement is a huge milestone for the Echelon team on the journey to establishing a global data centre platform centred around large-scale campuses, and vertical integration with power generation. It is also a milestone day for Starwood Digital Ventures, and we are excited to be one of the foundation blocks as they rapidly grow their Digital Infrastructure business."

Sustainable Data Centers: Funding and Build-Outs

Meanwhile, multiple companies are investing in sustainable data centers. Among the milestones to note:

• July 2023: GreenSquareDC, a data center technology startup focused on Green IT and sustainability, joined NVIDIA Inception, an accelerator program designed to nurture startups.
• July 2023: Global IT consulting firm HCLTech and Schneider Electric are partnering to develop energy- and carbon-efficient solutions for data center customers in the Asia Pacific (APAC) region.
• July 2023: Digital Realty will leverage IBM Envizi ESG software suite to gather and manage sustainability data across more than 300 data centers worldwide, the two companies disclosed today.
• June 2023: evroc, a startup backed by EQT Ventures and Norrsken VC, is striving to build Europe's first sovereign hyperscale cloud business that leverages sustainable energy, the company said.

Additional Green Data Center Milestones

Additional worldwide developments include:

• United States: Climate Adaptive Infrastructure (CAI), through a relationship with DigitalBridge, plans to invest up to $300 million in sustainable digital infrastructure. The first investment involves Switch, a 100% renewable-powered data center provider.
• Latin America: Aligned Data Centers in May 2023 completed the acquisition of Latin America data center provider ODATA. Roughly 85% to 90% of the energy consumed by ODATA is renewable. The M&A deal was first announced in December 2022. Financial terms were not disclosed.
• Africa: Raxio Data Centres has lined up a US$170 million debt facility to further expand operations across Africa. The twist? The debt facility -- involving Roha Group, Meridiam, Proparco and the Emerging Africa Infrastructure Fund -- is tied to various sustainability and ESG (environmental, social & governance) goals.
• Brazil: Scala Data Centers has achieved 100% Scope 3, as recommended by the GHG Protocol.
• Europe: AQ Compute and CBRE in 2022 partnered as part of a push to make AQ Compute a "pan-European leader in providing global clients with data centre services." All of the AQ Compute data centers are expected to leverage 100 % renewable energy, the companies said.
• Europe: Alces Flight and EcoDataCenter partnered to provide customers with "best-of-breed managed services and sustainable computing for their private research clouds," the two companies said.

Related: Track all green data center news here.

We'll be watching to see if Echelon strives to grow organically, through acquisition or through a mix of both.