Private equity dominates data centre M&A deals

New data from Synergy Research Group shows that 187 data center-oriented M&A deals closed in 2022 with an aggregate value of $48 billion, just shy of the record-setting $49 billion in deals that closed in 2021.

In the last seven years the total value of M&A deals has now passed the $200 billion mark, with almost half of that coming in the last two years. Since 2018 the average deal size has almost tripled, growing from $80 million to $235 million. Apart from the rapid rise in overall data center M&A activity, the most notable feature has been the extent to which private equity has flooded into the market. In 2020 private equity accounted for 55% of the value of closed deals, rising to 66% in 2021 and 91% in 2022. Since 2018 private equity funding has risen by an average 50% per year and in 2022 reached $44 billion.

The highlights for 2022 were the $15 billion acquisition of CyrusOne by investment firms KKR and Global Investment Partners, and the acquisition of Switch by DigitalBridge for $11 billion. The 2021 highlights were the acquisitions of CoreSite and QTS, each for around $10 billion. These deals represent the four highest value acquisitions the industry has ever seen. All four acquired companies feature in the worldwide top 16 ranking of colocation operators, while they are ranked three through six in the US market, behind only Equinix and Digital Realty. Prior to these four record-setting transactions, the biggest data center M&A deals were Digital Realty’s $8.4 billion acquisition of Interxion, Digital Realty’s $7.6 billion acquisition of DuPont Fabros, the Equinix acquisition of Telecity for $3.8 billion, the Equinix acquisition of Verizon’s data centers for $3.6 billion and the acquisition of Global Switch by the Jiangsu Shagang Group of China, which was eventually valued at over $8 billion in transactions that were spread over three years. Apart from these mega deals, some of the most notable serial acquirers have been Equinix, Digital Realty, EQT, DigitalBridge/Vantage, Stonepeak, CyrusOne, GDS, GI Partners, Keppel, Macquarie, Mapletree and NTT.

Data centers are being viewed as long-term safe havens for investments, even during turbulent times, causing a huge influx in private equity. Ten of the twelve largest deals in the last twelve months have involved private buyers, with the only exceptions being the Equinix acquisition of Entel’s data centers and Digital Realty’s acquisition of a majority stake in Teraco. In the US, only six of the twenty largest colocation players are now publicly traded companies.

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