Cyxtera Technologies

Cyxtera Technologies was a colocation data center operator with over 60 facilities across North America, Europe, and Asia. The company merged with Starboard Value Acquisition Corp in July 2021, sponsored by the well-known activist hedge fund.

The data center industry was booming, driven by cloud computing and digital transformation. Cyxtera's pitch was that its large footprint and enterprise customer relationships positioned it to capture this growth. Starboard Value's involvement lent credibility.

But Cyxtera was carrying massive debt from a 2017 leveraged buyout by BC Partners. The SPAC merger didn't adequately address this debt burden. As interest rates rose in 2022-2023, the cost of servicing .7 billion in debt became unsustainable.

Despite reasonable revenue (~00M annually), Cyxtera couldn't generate enough free cash flow to service its debt and invest in growth simultaneously. In June 2023, the company filed Chapter 11 bankruptcy. The data centers continued operating — the physical assets had value — but equity holders were wiped out. It was a reminder that even good assets can be destroyed by bad capital structures.