Operational Due Diligence (Buy Side) for a Data Center Operator
The Project
A private equity firm was evaluating an acquisition of a pioneering edge data center. They needed comprehensive construction due diligence before finalizing their offer.
With plans to expand into hyperscale territory, the operator was a potentially valuable acquisition target, but only if the construction and capital management program could support rapid growth without sacrificing schedule or budget performance.
Based on the due diligence findings, the private equity firm crafted an offer that accurately reflected the data center operator’s risk profile. Findings revealed capital program vulnerabilities that would require significant investment and restructuring to support hyperscale growth, and the firm’s offer accounted for these realities.
The due diligence protected the private investment firm from overpaying for an asset with fundamental operational constraints.
Project Challenges
Delivering on aggressive project schedules: The data center operator faced intense pressure to deliver projects on aggressive schedules while managing cost volatility.
Uncertain risk profile: The due diligence needed to address whether the operator’s current capital management framework could support hyperscale growth and whether schedule compression or cost overruns would jeopardize the operator’s ability to meet delivery-by deadlines.
High-stakes acquisition: Since acquisitions in the data center space were entering uncharted valuation territory, a flawed capital program could turn a promising investment into a costly liability.
The Solution
Conducted an audit of the operator’s capital construction program, reviewing project histories, cost data, and schedules from completed builds.
Interviewed design and construction teams, contractors, and engineers to understand how the capital management program was being administered.
Critical Findings
30% below industry standards
FTE staffing levels would strain operational efficiency during scale-up
High-risk schedule compression
Front-end project timelines incurred costs before client commitments were secured
Scalability constraints
Capital program structure was insufficient to support hyperscale growth trajectory
