Friday, May 17, 2024

NCtrend: Server and protect



Server and protect
Dave Jones makes millions for his private-equity investors by safeguarding data.

by David Mildenberg

""Dave Jones is on his fourth set of owners, having built Charlotte’s most successful technology company by keeping management intact and making investors richer. San Francisco-based GI Partners is the latest group controlling Peak 10 Inc., downloading $730 million into the company. “It’s very rare to have a guy who takes a business from a startup to nearly $1 billion in value, but that tells you about all you need to know about Dave,” says Richard Maclean, president of Charlotte-based Frontier Capital LLC, one of Peak 10’s first institutional investors. “And he did that while working for some very hard-to-please investors along the way. Private-equity guys aren’t cupcakes.” GI is borrowing more than $460 million, almost eight times Peak 10’s earnings before interest payments and taxes, according to New York-based Standard & Poor’s Financial Services LLC. It was among 13 potential buyers Jones met with, sparking bids that culminated in a highly leveraged company with a junk-bond rating from S&P — and pressure on him to deliver.

He can handle it, friends say, noting that Jones — who turns 68 this month and has run 28 marathons and owns bike shops in Athens, Ga., and Chattanooga, Tenn. — combines the vigor of someone decades younger with a savant’s savvy. “He’s a man of passions, and he doesn’t do anything small,” says Micah Morlock, manager of Georgia Cycle Sport in Athens since it opened in 2002. Jones spends most of his workweek in Charlotte and weekends in Athens, often puttering around his store on Saturday mornings before riding. “He’s about as down to earth as you are ever going to find. I’ve never known him to take a flashy vacation or drive the flashiest new car,” says Jeff Hay, a lawyer with Womble Carlyle Sandridge & Rice LLP in Charlotte who has worked with him for 15 years. Jones, whose family owned a tobacco farm near Blackstone, Va., drives a pickup truck and an Audi S7.

In building Peak 10, he has relied on other people’s money and executives who have been part of the company since its early days. “Dave has a true knack for assembling a team and a way of mentoring people and rallying the troops that is extremely rare,” says Nick Kottyan, who co-founded Peak 10 and now runs Winston-Salem-based DataChambers LLC, a data-center services provider owned by North State Communications LLC of High Point. “He could tell his staff, ‘We’re going to march down I-77 today, and nobody’s going to get hit,’ and they will march right behind him and believe in his plan.”

Kottyan was CEO of Peak 10, named for a slope at Breckenridge Ski Resort in Colorado, when it began in Florida in 1999. He sent the business plan to several friends in the telecom industry, including Jones, whom he met when they worked for competing long-distance companies in the mid-1980s. The concept was to charge businesses rent and fees to host and care for their servers at a secure, remote location. “Dave was living in Athens, Ga., and doing a ton of traveling for a consulting firm,” Kottyan says, “and he told me he was tired of it.” They each invested more than $350,000 and raised $6 million from friends — including Jefferson Holt, former manager of R.E.M., the Athens-based band — and opened the first data center in Jacksonville, Fla., followed by one in Charlotte, where they moved the headquarters in 2001 for its location and busy airport.

Frontier Capital passed on the first round but joined Seaport Capital LLC, a New York-based private-equity group, a year later to invest $18 million in Peak 10. “It wasn’t a slam-dunk decision for us to invest,” Maclean says, “but it turned out to be a fantastic investment.” He is among friends and colleagues who have started biking or running with a push from Jones, who begins his day with a 6 a.m. workout.

Kottyan left in 2002 because new investors considered Jones more capable of guiding Peak 10 through the slowdown in IT spending after 9/11. Kottyan, who held his shares until New York-based Welsh, Carson, Anderson & Stowe bought the company for $410 million in 2010, says he earned a substantial profit, as did Jones and everyone else invested in it. He’s a fan of his ex-partner. “When Dave needs to deliver bad news, he has a no B.S. attitude. He can really give you the what-for. But he’s one of those guys who can chew you out, yet you come away saying, ‘That was OK. I understand where he’s coming from. It’s business, not personal.’”

""With revenue growing 17% a year the last four years, Peak 10 now has about 400 employees and 24 data centers in 10 cities, with two more under construction. But it wants to grow faster. New centers typically cost $11 million, more than double what they did a decade ago because of customer demands and changing technology. Private-equity firms typically hold investments five to seven years, though Welsh Carson cashed out in less than four after Jones pressed for money to add centers. Expansion plans were put on hold while the firm decided whether to sell, Jones says. “It might have happened a little quicker if they had said, ‘Oh, hell yeah, let’s go.’” Welsh Carson did just fine. It took out $190 million in dividends when Peak 10 refinanced its debt in 2012, nearly matching its initial investment two years earlier, Jones says. They got $363 million more in the June sale.

GI Partners has invested in seven other IT infrastructure businesses but is placing its biggest bet on Jones and Peak 10’s “exciting growth potential,” says David Mace, a director. Private equity has enabled Peak 10 to grow without the hassles of public ownership, though an IPO “probably makes sense at a certain size,” says Jones, a graduate of University of Virginia. “We have a long runway in front of us, and one of the goals we have is to create a national footprint. That’s something that resonated with GI.”













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