Equinix, the data center company, has recently won its 69th consecutive positive quarter. One way to achieve this type of sales consistency is through strategic acquisitions. The company announced today that it will purchase 13 Bell Canada data centers for $ 750 million, significantly expanding its presence in the country.
The deal is described in detail by Equinix across two axes, including data center costs in terms of revenue and adjusted profit. In terms of revenue, Equinix finds the company pays $ 750 million for an estimated annual revenue of $ 105 million, which is calculated based on last quarter results multiplied by four. This gives the purchase a sales multiplier of slightly more than 7 times.
Equinix also delivered an adjusted profit multiplier, saying the 13 data center locations “[represent] a purchase multiplier of approximately 15x EV / adjusted EBITDA. “When you unpack that, the company says the enterprise value of the asset (similar to market capitalization, a popular valuation metric for public companies) is about 15 times its earnings before interest, taxes, depreciation and amortization (EBITDA). This seems like a healthy price, but none that is outrageous.
The acquisition not only provides the company with additional revenue and a stronger foothold in the tenth largest economy in the world, but also gains 600 customers in Bell data centers, 500 of which are not new.
Equinix is buying 13 data centers from Bell Canada for $750M
With much of the world trying to change digitally amid the pandemic and the current economic crisis, Equinix sees this as an opportunity to help more Canadian customers go digital faster.
“Equinix has served the Canadian market in Toronto for more than a decade. This expansion and scale offer the Canadian market a clear and fast migration path to digital transformation. We look forward to deepening our relationships with our existing customers in Canada and helping new companies across the country position themselves for digital success, ”said Jon Lin, Equinix President, Americas, to Tech Report.
This is not the first time that Equinix has taken a number of data centers out of the hands of a telecommunications company. Three years ago, the company bought 29 centers from Verizon (the owner of Tech Report) for $ 3.6 billion.
Data Center Business
If telecommunications companies move away from data center business, companies like Equinix can open up new markets and increase sales. This is one of the ways to generate positive earnings year after year.
Today’s deal is only part of this strategy to further expand into new markets and find new ways to generate additional revenue as more companies use their services. Equinix rents storage space in its data centers and provides all the services companies need without having to run their own. These include, for example, heating, cooling, racks and cabling.
Although public cloud companies like Amazon, Microsoft and Google are making headlines with increasing revenue, many companies want to run their own devices without paying the cost of actually owning the building in which the devices are located.
Today’s deal is expected to close in the second half of the year provided all regulatory controls required for a purchase like this are complete.