Halyard Capital, a New York-based private equity firm, has announced the formation of Digital Fortress, a new data center colocation platform, along with two initial acquisitions of digital.forest, Inc. and Fortress Colocation Services. Headquartered in Seattle, Digital Fortress capitalizes on the underserved market of regional small to medium sized enterprises seeking to enhance their overall IT infrastructure capabilities through outsourcing with colocation service providers. The company is also well-positioned to meet the growing demand among national corporations for data centers that have access to abundant low-cost electricity with a high concentration of renewable energy.

Recognizing the favorable industry secular trends of: i) supply/demand imbalance; ii) IT outsourcing; iii) growth in Internet traffic and bandwidth demand; and iv) an increased focus on disaster recovery and regulatory demands, Halyard has been proactively pursuing investment opportunities within the IT Infrastructure & Services sector. Halyard has significant experience with data center infrastructure and IP networking solutions businesses, having previously been an investor in Inflow Communications. 

Inflow managed data centers that provided colocation services and other value-added network services, and was ultimately acquired by SunGard Data Systems. The creation of Digital Fortress leverages Halyard’s data center industry expertise and represents the culmination of this multi-year investment initiative effort. Furthermore, this is a continuation of Halyard’s investment strategy of combining research-driven thesis formulation with deep sector expertise and an extensive executive network to create buy-and-build platforms.

“During the past few years, we have seen increasing demand in the market for high quality, power dense colocation services, driven by significant growth in digital information and enterprise migration towards IT outsourcing, as well as fundamental advancements in computing technologies, which Digital Fortress is uniquely positioned to deliver” said Robert Pistilli, vice president at Halyard Capital.

Digital Fortress also serves as a platform for consolidating the highly fragmented data center marketplace in the Pacific Northwest and for select organic new data center build or refurbishment opportunities. The company is currently evaluating the refurbishment of an existing data center space located in downtown Seattle, which would provide Digital Fortress customers with multi-site data center redundancy and increased growth capacity.

Halyard is partnering with Meritage Funds and Sweetwater Capital in forming Digital Fortress, with Mark Hughes, former chief financial officer of Inflow Communications and executive vice president of operations at SunGard Availability Services, serving as executive chairman.

“Digital Fortress will differentiate its service offering by delivering high-density power applications serviced with a highly efficient and effective operating model,” said Hughes. “We believe this model will deliver best-in-class infrastructure solutions comparable to nationally recognized competitors, but at a more attractive value to customers.”