Happy Wednesday. Here’s what we’ve got today…

• A look at the risk of data center obsolescence

• Plus, GTCR nears a deal for Bain and Cinven’s Stada

Data center second thoughts:

Investors have been quick to capitalize on an attractive data center supply-demand mismatch that's sent valuations (and potential returns) through the roof. Layering on the rapid growth of compute-heavy artificial intelligence use cases, it seems like things couldn't be better for the asset class, at least on the surface.

But, it's possible there's now too much of a good thing.

As recently as 2022, 43 percent of investors felt that "data centre technology is relatively future-proof compared to other asset classes,” including the sentiment as one of their top three investment drivers in a DLA Piper survey. Just 24 months later, there are the earliest hints of concern that data centers may be more exposed to tech change than previously thought.

AI's computing requirements have introduced such a step change in data center needs that disruptive hardware innovation is now almost a requirement to meet demand. For a sense of how drastic that disruption might be, consider Larry Ellison's announcement today that Oracle has recently secured building permits for a new larger-than-gigawatt-capacity data center powered by three modular nuclear reactors.

Other hyperscale cloud providers are pursuing similarly aggressive strategies: Microsoft is also exploring small modular reactors and microreactors to support its cloud operations, while Google has invested in novel geothermal power systems.

Traditional data centers, designed for more modest workloads, are struggling to keep pace with the extreme power densities of AI-optimized hardware. New use cases require densities of 50 kW per rack or higher, compared to 5-10 kW for typical enterprise workloads just a few years ago, and some AI training needs could reach as high as 100 kW per rack.

It's not just a question of managing power needs: next-generation hardware requires more sophisticated cooling solutions, which has led to a shift toward new direct liquid cooling technologies. In practice, this means a fundamental change to data center design, from the rack level up to entire facility layouts.

Jordi Sinfreu, JLL's Head of Data Centers for Southern Europe, explains that "higher density implies heavier racks, which affects floorplate loads and footprint, while increased heat generation is resulting in a shift away from traditional air cooling towards various types of liquid cooling."

The upshot is that assets that were recently seen as cutting-edge may now be at risk of accelerated obsolescence. Facilities constructed even five years ago lack the electrical capacity, cooling systems, and physical space to accommodate the latest high-density AI hardware. Retrofitting these data centers is often prohibitively expensive or technically infeasible, leaving owners with difficult choices about decommissioning or repurposing assets.

As demand shifts toward AI-optimized facilities, older data centers may struggle to maintain occupancy and revenue. Even today, many tenants take advantage of lease expirations to upgrade infrastructure by relocating to a new provider. This could cause older facilities to become stranded assets — unable to meet new power and cooling requirements and relegated to lower-value use cases.

On the more bearish end of the spectrum, some industry observers have drawn parallels to previous technological shifts that rendered entire classes of infrastructure obsolete, such as the transition from mainframes to distributed computing.

Long-term tenancy can blunt some of the immediate impact, but the real concern is the erosion of asset value when it comes time to exit. Over the last four years, data center EBITDA multiples have ranged between 25x and 30x, according to data from CBRE, compared to an average of 16x for the wider universe of private infrastructure deals.

A similar premium for future exits is less certain. There is already a clear valuation gap developing between the highest-quality assets and legacy builds. If this trend is developing in the earliest days of AI-led expansion, it's not unreasonable to expect even more drastic (and yet unknown) hardware developments for what is increasingly seen as the main bottleneck for further AI advancement.

In a worst-case scenario, this leads to a situation in which investors purchased assets at nosebleed valuations that could only be justified by future AI-driven demand growth, only to miss out on that upside because the trend they bet on turned out to be too hot to handle.

• GTCR is in advanced talks to acquire Stada, a German generic drugmaker, from Bain Capital and Cinven at a valuation of around €10 billion.

• Abu Dhabi National Oil Company (ADNOC) is expected to make a formal offer to acquire Covestro, a German chemicals company, for €14.4 billion, per the Financial Times.

• THL Partners agreed to acquire a majority stake in AMI, a provider of semiconductor software, from HGGC for around $600 million.

• Vista Equity Partners and Warburg Pincus agreed to acquire Redwood Software, a composable automation solutions platform, from Turn/River Capital.

• Rightmove (LSE: RMV) rejected a £5.6 billion cash-and-stock offer from REA Group, an Australian property listing firm majority-owned by Rupert Murdoch's News Corp.

• Contact Energy offered to acquire Manawa Energy, a New Zealand renewable electricity generator, for around $1.14 billion in cash and shares; infrastructure investor Infratil holds a 51 percent stake in Manawa.

• Brookfield Asset Management agreed to invest up to $1.1 billion in Infinium, a low-carbon synthetic fuels developer.

• Rotunda Capital Partners invested in Mama Lycha Foods, a provider of food and beverage products from Latin America.

• The Riverside Company acquired Cloudpermit, a building permitting and land management software provider, from Vaaka Partners.

• Renovus Capital Partners acquired QualX Corporation, a provider of information management and digital transformation services to federal agencies.

• Confluent (Nasdaq: CFLT) acquired WarpStream, a Kafka-compatible streaming data solution.

• Mercury acquired Teal, a seed-stage startup building accounting products for vertical SaaS customers.

• OceanSound Partners acquired PAR Excellence Systems, a provider of supply chain integrity and cost management solutions for healthcare organizations, from Northlane Capital Partners.

• Wasserman acquired International Football Management, a Swiss soccer agency.

• L Catterton acquired a majority stake in Stenders, a Latvian bath and body care company.

• Wind Point Partners acquired Clean Solutions Group, a manufacturer of nonwoven products for air filtration and sanitation applications.

• Eir Partners acquired a majority stake in PharmaForceIQ, a provider of omnichannel pharmaceutical marketing solutions.

• Siemens agreed to acquire Trayer Engineering, a US-based manufacturer of medium voltage secondary distribution switchgear.

• Paul Marshall agreed to acquire The Spectator, a British political magazine, for £100 million from RedBird IMI.

• Falfurrias Management Partners invested in MOXFIVE, a cybersecurity platform providing incident response and risk mitigation services.

• OMERS agreed to acquire a 13.5 percent stake in Interise Trust, an Indian toll-road operator, from Allianz Capital Partners.

• Litmus Music acquired Opus Music Group, owner of music catalog rights for artists including Juice WRLD, Ozuna, and Maluma.

• AMCS, backed by EQT, acquired Qv21 Technologies, a provider of fleet management SaaS solutions for short-haul, bulk commodity transportation.

• IBM (NYSE: IBM) agreed to acquire Accelalpha, a provider of Oracle cloud management solutions, from Century Park Capital Partners.

• UPS agreed to buy Frigo-Trans, a German pharmaceutical logistics provider.

• SEVA invested in Chicory, an end-to-end contextual commerce media platform.

• WPP (LSE: WPP) acquired New Commercial Arts, a London-based creative agency, merging it into Ogilvy Group UK.

• Post Oak Energy Capital invested in Quantent Energy Partners, an Oklahoma City-based natural gas exploration and production company targeting assets in the Haynesville and Bossier shale formations.

• Argentum invested in L2 Aviation, a Texas-based avionics services provider.

• ConnectWise, backed by Thoma Bravo, agreed to acquire Axcient, a provider of data protection and disaster recovery solutions, from Silver Lake and K1 Investment Management for up to $500 million.

• Brightmore Brands, a portfolio company of Beach Point Capital Management, acquired Texas Thrift, a portfolio of 17 thrift stores, from Brook Valley Management.

• RoadSafe Traffic, backed by Investcorp and Trilantic North America, acquired All Star Striping, a Utah-based pavement marking business.

Tech, Vertical SaaS, & Misc. Enterprise

• Glean, an AI-powered enterprise search platform, raised $260 million in Series E funding co-led by Altimeter Capital and DST Global, with participation from Craft Ventures, Sapphire Ventures, SoftBank Vision Fund 2, Coatue, General Catalyst, ICONIQ Growth, IVP, Kleiner Perkins, Lightspeed Venture Partners, and Sequoia Capital.

• Quantum Source, an Israeli photonic quantum computing startup, raised $50 million in Series A funding led by Eclipse, with participation from Standard Investments, Level VC, Canon Equity, Pitango First, Grove Ventures, 10D, and Dell Technologies Capital.

• AttoTude, a Menlo Park-based provider of interconnect technology for AI and hyperscale data center applications, raised $29 million in Series A funding led by Sutter Hill Ventures, with participation from Canaan Partners and Wing Venture Capital.

• Connectly, a conversational commerce AI platform, raised $20 million in Series B funding led by Alibaba, with participation from Unusual Ventures, Volpe Capital, RX Ventures, Falabella Ventures, and Philippos Kourkoulos Latsis.

• P0 Security, a provider of a unified IGA and PAM platform for cloud identity security, raised $15 million in Series A funding led by SYN Ventures, with participation from Zscaler and Lightspeed Venture Partners.

• Retraced, a SaaS platform for sustainability and compliance in fashion supply chains, raised €15 million in Series A funding led by Partech, with participation from Alante Capital, Alstin Capital, Samaipata, and F-Log Ventures.

• Odigos, an eBPF-based observability platform for distributed tracing, raised $13 million in Series A funding led by Venture Guides, with participation from Salesforce Ventures, Mango Capital, and Firestreak Ventures.

• StackGen, a generative infrastructure-from-code startup, raised $12.3 million in seed funding led by Thomvest Ventures, with participation from WestWave Capital, FireBolt Ventures, and Secure Octane.

• Protégé, an AI training data platform, raised $10 million in seed funding led by CRV, with participation from SV Angel, Liquid 2 Ventures, Bloomberg Beta, and Flex Capital.

• Spare, a mobility operations software provider, raised C$42 million Canadian dollars in Series B funding led by Inovia Capital, with participation from Kensington Capital and Nicola Wealth.

Fintech

• Form3, an account-to-account payments platform, raised $60 million in Series C extension funding from British Patient Capital, with participation from Visa.

• Versana, a real-time digital syndicated loan market data provider, raised $26 million in new funding from Barclays, Bank of America, Citi, Deutsche Bank, J.P. Morgan, Morgan Stanley, and Wells Fargo.

• Paymob, an Egyptian payments fintech, raised $22 million in Series B extension funding led by EBRD Venture Capital, with participation from Endeavor Catalyst, PayPal Ventures, BII, FMO, A15, Nclude, and Helios Digital Ventures.

• Twenty7tec, a UK-based provider of B2B mortgage and wealth advisory technology solutions, raised £16.5 million in funding from BGF to accelerate product development, enhance technology infrastructure, and explore new market opportunities.

• Datricks, a financial compliance software startup, raised $15 million in Series A funding led by Team8, with participation from SAP and Jerusalem Venture Partners.

• Sigo Seguros, a digital-first auto insurance provider targeting Hispanic communities, raised $10.5 million in Series A funding led by Varco Capital and Listen Ventures, with participation from Angeles Ventures, Flintlock Capital, Zeal Capital Partners, Rise of the Rest, and Fiat Ventures.

• Illuma Labs, a provider of voice authentication tech for banking contact centers, raised $9 million in Series A funding led by LiveOak Ventures, with participation from Forefront Venture Partners, Curql Fund, UsNet, Capital Factory, Connexus, and TDECU.

Healthcare

• Candid Therapeutics, a developer of TCE antibody therapies for autoimmune diseases, raised $370 million in new funding and simultaneously acquired Vignette Bio. Backers include Venrock, Fairmount, TCGX, venBio, Foresite, Third Rock, Fidelity, Samsara BioCapital, Qiming Venture Partners, OrbiMed, Boxer Capital, Redmile Group, Vida Ventures, Two River, Franklin Templeton, LifeSci Venture Partners, Mirae Asset Capital Life Science, Polaris Innovation Fund, and Soleus Capital.

• Qualifyze, a life sciences supplier risk management platform, raised $54 million in Series B funding led by Insight Partners, with participation from HV Capital, HarbourVest Partners, H14, and Cherry Ventures.

• SpectraWAVE, a coronary artery disease imaging startup, raised $50 million in Series B funding led by Johnson & Johnson Innovation, with participation from S3 Ventures, Lumira Ventures, SV Health Investors, Deerfield Management, NovaVenture, and Heartwork Capital.

• Viome, a microbiome and personalized health startup, raised $25 million in Series D funding from Khosla Ventures, Bold Capital, and WRG Ventures.

• Brightflow SAS, developer of a percutaneous right ventricular assist device for heart failure patients, raised €16.5 million in Series A funding led by VIVES Partners, Majycc Innovation Santé, and BNP Paribas Development, with participation from GO Capital and Karista.

• CardiaTec, a Cambridge-based developer of computational methods to decode cardiovascular disease biology, raised $6.5 million in seed funding led by Montage Ventures, with participation from Laidlaw Scholars Ventures, Apex Ventures, and Continuum Health Ventures.

Industrials, Greentech, & Other

• Forterra, a developer of autonomous systems for defense and industrial applications, raised $75 million in Series B funding led by Moore Strategic Ventures, XYZ Venture Capital, and Hedosophia, with participation from Standard Investments, Enlightenment Capital, Crescent Cove Advisors, and Four More Capital.

• Formo, a German fermentation startup producing animal-free cheese alternatives, raised $61 million in Series B funding from Foodlabs, EQT Ventures, Lowercarbon Capital, Happiness Capital, Elevat3 Capital, M Ventures, Grazia Capital, Sazaby League, Seven Ventures, Woodline Partners, The Nature Conservancy, and REWE Group.

• Puraffinity, a London-based PFAS removal startup, raised $13.9 million in Series A funding led by Octopus Ventures, with participation from Kindred Capital, HG Ventures, Verve Ventures, Acequia Capital, and Universal Materials Incubator Co.

• Elum Energy, a Paris-based provider of renewable energy management solutions, raised $13 million in Series B funding led by Energize Capital, with participation from Alter Equity and Cota Capital.

• Catalera BioSolutions, a Vancouver-based biological pest control provider, raised $8 million in Series A funding led by S2G Ventures, with participation from Farm Credit Canada Capital.

• Intermediate Capital Group raised €15.2 billion for its fifth European direct-lending fund.

• Bain Capital Life Sciences raised around $3 billion for its fourth fund.

• BEX Capital raised $765 million for its fifth fund focused on French private equity secondaries.

• Sienna Private Equity, co-founded by former Oaktree managing directors, raised over €400 million for its debut fund.

• Next Frontier Capital raised $102 million for its fourth fund focused on early-stage investments in the Rocky Mountain region.

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