Xand Acquisition Gives TierPoint Instant National Player Status
Xand’s campus in Westchester County, New York, consists of two buildings, 160,000 square feet each. (Photo: Xand)

Xand Acquisition Gives TierPoint Instant National Player Status

TierPoint gains massive northeast footprint, advanced cloud capabilities

TierPoint continues this year's momentum with the acquisition of Xand and its sizable footprint in the northeast data center market. Freshly recapitalized, TierPoint has been expanding aggressively through both acquisition and building.

Colocation and cloud provider Xand adds six data centers, totaling 140,000 square feet and another 1,000 customers for 3,700 customers total. The purchase price was not disclosed, but the acquisition is being funded through a combination of incremental equity from existing TierPoint investors and new investor Ontario Teachers’ Pension Plan.

Xand's data centers are in New York, Pennsylvania, Connecticut and Massachusetts. TierPoint has data centers in Dallas, Spokane, Seattle, Pennsylvania and Baltimore.

Bringing its portfolio size to more than 300,000 square feet of raised floor, the deal instantly makes TierPoint a national player, with a total of 13 data centers in 10 markets. It also sets TierPoint up for further growth, giving the company master-planned space to add up to 150,000 square feet of data center space.

Expanding size and product portfolio

It is a straight-forward consolidation deal. Both companies wanted to expand out of their markets and had similar cultures and play books.

"It's kind of ironic: If you look at our stories, we’re both founded on acquisitions," said Xand founder and CEO Yatish Mishra. "We’re both focused on Tier 2 markets, both on the SME (small and mid-size enterprise). Both going towards hybrid. We essentially have the same playbook. The match is unbelievably perfect."

"It gives us a nice northeastern presence,” said TierPoint CEO Paul Estes. “It fills in and rounds out management team as well. Very similar in culture and in products that we offer."

Xand locations now part of growing TierPoint portfolio

Xand locations now part of growing TierPoint portfolio

The merger serves both companies' existing customers well, giving them the option to expand geographic diversity through a single data center provider, Estes said. He noted that Xand was a little further ahead when it came to cloud which will help boost these offerings across the footprint.

"Another important combination is of our technical development team, meaning we can dedicate more dollars towards developing our services," said Andy Stewart, TierPoint’s CFO.

TierPoint execs said that all of Xand's markets and facilities fir into their strategy. Among them, the Philadelphia market was the most attractive because of an existing presence in Philadelphia. "It solved an expansion issue we had," Estes said about Philadelphia.

TierPoint has predominantly relied on acquisitions to expand but is also building an Oklahoma facility. It acquired Perimeter Technology in 2011.

Xand backer ABRY Partners is a private equity investment firm with a lot of stakes in the data center and communications space. It acquired Xand in 2011 and significantly built the company up through a merger with Access Northeast in 2012. Xand and Access Northeast together formed one of the largest privately held data center companies in the northeast, which is now being folded into TierPoint.

"We were exploring ways to expand the business," Mishra said. "We were bound in the northeast and wanted to expand beyond, a number of clients asking for east and west."

TierPoint on lookout for more acquisitions

The deal is the latest example of ongoing consolidation in the colocation data center market, where a handful of providers have been carving out territories. Multi-tenant data centers continue to proliferate in emerging and secondary markets, outside of the major metros. The data center is getting closer to the customer as more enterprises move off premises and more web workloads need to be closer to end users for lower latency.

"With this acquisition, TierPoint is doubling in size, gaining expansion space on the East Coast, and adding to its managed services capabilities," said Kelly Morgan, research director for data centers at 451 Research. "It's certainly a big move but probably will not be the firm's last acquisition, though we expect it to focus on integration for the next few months."

"The integration process is going to take a while," said Stewart. "The first twelve months are critical for us. We'll close the acquisition and put our heads down operating and integrating, but there are other exciting acquisition possibilities for the future."

DH Capital, which usually has its hands in the biggest data center deals (such as IBM's SoftLayer acquisition) served as exclusive financial advisor to ABRY and Xand. RBC Capital Markets and Credit Suisse will be providing debt financing for the transaction.

TierPoint’s current investor group includes Cequel III management, led by chairman Jerry Kent, RedBird Capital Partners, The Stephens Group, Jordan/Zalaznick Advisers, and Thompson Street Capital Partners.

New investor Ontario Teachers’ pension plan has more than $140 billion in net assets and demonstrates it’s probably a good time to be a teacher in Ontario.

Edit 10/27: Customer adds and total clarified in par. 2

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