US company acquires Calgary-based CoolIT for $6.6B in one of the city’s ‘biggest’ tech deals ever

Calgary-based CoolIT Systems, a specialist in liquid cooling for AI data centres, is set to be acquired by US company Ecolab for US$4.75 billion, in what is being said to be one of the city’s biggest tech deals of all time.

As part of the takeover, the company’s 650 employees will receive substantial cash payouts, ranging from about one year’s annual salary to more than eight years’ salary – a major announcement celebrated by workers on Wednesday.

Jerin Varghese, an engineer at CoolIT since 2021, said the money is “life-changing” for him and his family.

He said, “I actually have some plans about what to do. Maybe pay off the mortgage, invest some money and, you know, take care of family and parents.”

The 25-year-old company that started in a Calgary garage was acquired by global investment firm KKR in 2023, making its employees owners of the business. Abu Dhabi-based, state-owned investment company Mubadala also acted as a minority co-investor in CoolIT.

That year, as spending skyrocketed on data centers handling large AI workloads like OpenAI’s ChatGPT, CoolIT deployed it to capitalize on the tremendous new demand for liquid systems needed to cool racks of servers.

According to Mubadala, CoolIT now serves hyperscalers and data center operators in more than 300 facilities globally.

In form of wall street journal According to the report, when the sale closes later this year, each CoolIT employee is expected to receive an average payout of about $240,000 US, with the longest-serving employees potentially receiving at least $380,000 US, or eight times their salary.

Employees will also receive pre-paid personal financial coaching and tax preparation services.

In a release, KKR said the sale would generate about 15 times the original equity it had invested.

CoolIT President and COO Patrick McGinn said the company’s future looks bright, and he does not expect a recession in the near future.

“We are really excited to combine CoolIT’s liquid cooling technologies with Ecolabs’ water chemistry services and liquid management to create an operating system for our customers that is more efficient, that is higher performance and, of course, allows us to help them save water,” he said.

According to a release, Ecolab expects CoolIT to generate sales of approximately US$550 million over the next 12 months.

Concerns over AI consuming huge amounts of water

according to a ecolab presentation Upon acquisition, the company expects the liquid cooling market to grow 10x over the next 10 years.

“AI is changing the demands of data centers, and liquid cooling is one of the key technologies that make advanced computing possible,” Christophe Beck, president and CEO of Ecolab, said in a release.

But many Albertans across the province have raised concerns about how much water data centers consume, especially when it comes to liquid cooling.

McGinn acknowledged the criticism, saying “Water is a major concern. It’s a big topic in the industry today and … the way water has been used in data centers in the past is not the way water needs to be used.”

He said that new data centers can be built to use less water and he expects this to be true going forward.

He suggests that CoolIT’s direct-to-chip cooling technology could be implemented in closed loop systems instead of open systems, which can use huge amounts of water.

Is Calgary’s economy shifting towards AI?

Brad Parry, president and CEO of Calgary Economic Development, said, “It’s an amazing story…to have a technology company like that bought at that price. I mean, it’s probably the biggest tech deal in our city.”

He hopes the deal will be the beginning of more capital flowing into the city, as it sends a message to the world that Calgary is a place where businesses can grow to become globally competitive.

Over the past two to three years, McGinn said CoolIT has grown as an organization, largely due to “the investment that has come into Calgary and our manufacturing systems here, as well as the surge in AI computers being deployed in data centres.”

Revenue has improved four times and profits have increased 10 times, he said.

And while many companies are benefiting from the huge demand for AI, critics have speculated whether the AI ​​bubble can be expected to burst.

McGinn isn’t fazed.

“We don’t see an AI bubble in our business right now,” he said. “Our view as a supplier of hardware and systems to data center operators is that demand is significant and continuing to grow. And so for us and our business it looks like that growth will continue for quite some time.”

McGinn said he expects CoolIT to continue to hire more employees, many of whom are Calgarians, adding that the company currently hires an average of five to 10 people per week.

Parry said that while the AI ​​boom is happening “just now,” a company like CoolIT has been successful for decades, starting with building cooling systems for consumer gaming products.

“This is further proof that you don’t have to leave Calgary to build and expand a global company. And that’s what’s exciting about it.”