The data centre market has become a popular target for mergers and acquisitions, with the value of all M&A deals having already passed 2019’s total in just the first 16 weeks of 2020.
That’s according to new data from Synergy Research Group, which has been tracking the value of M&A deals for the past few years. The firm found that in the last four years the trend has been for the number of deals to increase sharply, while in the last two years the aggregate value dropped off due to a relative lack of mega-deals being closured.
That situation has reversed in the first months of 2020, thanks in large part to the $8.4 billion acquisition of Interxion by Digital Realty, which is the largest ever data centre transaction. Meanwhile two other billion dollar-plus deals have closed so far this year, as well as two that were valued at over $500 million.
Synergy has so far identified 28 data centre-oriented M&A deals that have closed this year, and with cloud services more popular than ever thanks to an uptick in demand partly accredited to the Covid-19 pandemic, deals are likely to continue apace in the near future.
Since the beginning of 2015 Synergy has identified 388 closed deals with an aggregated value of $90 billion. Over the period the aggregated deal value has been split equally between public companies and private equity buyers, while private equity buyers have accounted for 57% of the deal volume.
Since 2015 the largest deals to be closed are the acquisitions of Interxion and DuPont Fabros by Digital Realty, the acquisition of Global Switch by a group of Chinese investors and the acquisitions of Verizon data centres and Telecity by Equinix.
Over the 2015-2020 period, by far the largest investors have been Digital Realty and Equinix, the world’s two leading colocation providers. In aggregate they account for 35% of total deal value over the period. 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.
“This will be a bumper year for data centre M&A activity,” said John Dinsdale, a Chief Analyst at Synergy Research Group.
“In less than four months the M&A value has already surpassed 2019, in addition to which we are aware of 17 more agreed deals that are pending closure plus a few other potential multi-billion dollar deals. What is causing this surge in M&A? Outsourcing trends and the aggressive growth in cloud services are driving ever-growing demand for data centre capacity, which in turn is fueling both industry restructuring and a need to find new sources of investment capital.”