M&A data centre deals topped $20bn in 2017

The total value of significant data centre-orientated M&A deals that closed in 2017 surged to $20 billion, almost doubling the figure from 2016, according to new data from Synergy Research Group.

The figure, which far surpasses the joint total from 2016 and 2015, emphasises how the data centre and colocation industry is being driven by enterprises trying to minimise investments in their own data centre assets and by the booming growth of cloud services.

“Above all else, what is driving the data centre M&A activity is enterprises focusing more on improving IT capabilities and less on owning data centre assets,” said John Dinsdale, a chief analyst and research director at Synergy Research Group.

“That shift is driving huge growth in outsourcing, whether it is via cloud services, or use of colocation facilities, or sale and leaseback of data centres. The dramatic growth of cloud providers is also driving changes in the data centre industry, as data centre operators strive to help them rapidly increase scale and global footprint. We expect to see much more data centre M&A over the next five years.” 

As the scale and geographic scope of data centre operators’ footprint becomes ever more important, an inevitable outcome is a rise in M&A activities. Two companies in particular have been leading that charge. Digital Realty and Equinix combined account for over half the value of M&A deals closed over the last three years.

Over the 2015-2017 period, by far the largest investors have been Digital Realty and Equinix, the world’s two leading colocation providers. In aggregate they spent $19 billion on acquisitions of data centre operators, which excludes the pending acquisition of Metronode by Equinix. Equinix has made major acquisitions in all four regions of the world, while Digital Realty has focused on the United States and Europe. Other notable acquirers included: CyrusOne, Peak 10, Digital Bridge, NTT, Carter Validus, Iron Mountain, Cyxtera and Elegant Jubilee.

On average through 2017, there was almost one significant M&A deal closed every week. The largest transaction in the year was Digital Realty’s $7.6 billion acquisition of DuPont Fabros, but there were four other deals that were valued at a billion dollars or more, involving acquisitions by Equinix, Cyxtera, Peak 10 and Digital Bridge.

There were another twelve deals that were valued in the $100 million to $1 billion range, and 31 smaller deals that were each valued at up to $100 million. By comparison with the 48 deals closed in 2017, 2015 and 2016 combined saw just 45 deals, of which only three were in the billion dollar plus range. The largest deal in those two years was the Equinix acquisition of European retail colocation provider TelecityGroup for $3.8 billion.

Entering 2018, there are also four additional major deals that have been agreed but not yet closed, with a total value of over $2.6 billion.

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