Spire Capital Seeks Add-ons For Hosting Service

Spire Capital Partners LP plans on expanding the business of Carpathia Hosting Inc., a hosting services company, throughout the East Coast by building its sales team and making add-on acquisitions.

Spire Capital this month acquired the Ashburn, Va.-based company, which provides computer storage, security and monitstoring services for clients, from founder Rick Smith, for between $50 and $75 million, according to a source familiar with the deal. The firm is evaluating several potential targets as add-ons, said Sean White, partner at the New York-based shop.

With its new platform, Spire Capital is taking advantage of two trends, White said. One is the move by corporations and government agencies to outsource their IT infrastructure to hosting providers; the other is the growing demand by these same clients for computing power and infrastructure to support their Web sites.

Spire Capital funded the deal with 50 percent equity along with seller financing provided by Smith. The deal involved no other new lenders. White, who said his firm has funded prior deals this way, declined to discuss the terms of the seller financing, and Smith could not be reached for comment. Seller financing is becoming more common due to the difficult lending environment.

Peter Weber, who founded and eventually sold SevenSpace, a Washington D.C.-based internet technology services company, to Sun Microsystems in 2005, will replace Smith as CEO. Bill Ranney, the former chief financial officer of SevenSpace, who also served in senior finance roles at Sun Microsystems and Verizon, is joining Carpathia as CFO. Smith, the former CEO, is staying on as a member of the executive leadership.

Andrew Armstrong, Bruce Hernandez and Richard Patterson, former partners at Waller-Sutton Media Partners, a media and communications buyout shop, founded Spire Capital in 2000. White joined the firm as a principal at the time of its formation. Spire Capital, which manages about $600 million, acquires small companies in business services, information, services media and communications.