Data centre M&A deals rise as private equity takes control

Data centre M&A deals rise as private equity takes control

Number of deals increased six per cent during the past 12 months compared to 2018

Credit: Dreamstime

Merger and acquisitions (M&A) activity related to the data centre passed the 100 mark for the first time during 2019, with private equity interest attributed to the rise in closed transactions.

According to Synergy Research findings, the number of deals increased six per cent during the past 12 months compared to 2018, representing more than double the number of agreements closed in 2016. Within the space of five years, almost 350 deals have been closed.

In 2019, a 50 per cent increase in private equity deals was recorded, offsetting a “sharp” 45 per cent drop in M&A deals closed by public companies.

As cited by Synergy Research, 2017 marked a peak in average deal values, "largely due to three multi-billion dollar deals and three more valued at over a billion dollars each", with the number of billion-dollar deals declining in 2018 and again in 2019.

“The aggressive growth of cloud services and outsourcing trends more generally are fuelling a drive for scale and geographic reach among data centre operators, which in turn is stimulating data centre M&A activities,” said John Dinsdale, chief analyst of Synergy Research.

Credit: Synergy Research Group

“This has been attracting an ever-increasing level of private equity activity as investors seek to benefit from high-value and strategically important data centre assets. It is also notable that even the biggest publicly traded data centre operators are increasingly turning to joint ventures with external investors to help fund growth and protect balance sheets.”

Since the beginning of 2015, Dinsdale said Synergy has identified 348 closed deals with an aggregated value of US$75 billion.

“Over the five-year period the aggregated deal value has been split roughly equally between public companies and private equity buyers, while private equity buyers have accounted for 57 per cent of the deal volume,” a research note stated.

Since 2015, the largest deals to be closed are the acquisition of DuPont Fabros by Digital Realty, the Equinix acquisition of Verizon’s data centres and the Equinix acquisition of Telecity.

“Over the 2015-2019 period, by far the largest investors have been Digital Realty and Equinix, the world’s two leading colocation providers,” the research note added. “In aggregate they account for 31 per cent of total deal value over the period.”

Digital Realty also has a pending deal to acquire Interxion, in what would be the largest ever data centre transaction.

"Other notable data centre operators who have been serial acquirers include CyrusOne, Iron Mountain, Digital Bridge/DataBank, NTT, GI Partners, Carter Validus, GDS, QTS and Keppel," the research note stated.

Tags Synergy Research

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