Private equity floods into data centres as investors seek ‘safe havens’
Last year’s M&A deals in the data centre industry were US$1 billion down on 2021, but private equity’s share rose dramatically.
A survey by Synergy Research Group shows that 187 data centre 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.
But private equity investors’ share of completed deals (see chart) have risen steadily from 55% in 2020, to 66% in 2021 and 91% in 2022.
Synergy says: “Data centres are being viewed as long-term safe havens for investments, even during turbulent times, causing a huge influx in private equity. Ten of the 12 largest deals in the last twelve months have involved private buyers, with the only exceptions being the Equinix acquisition of Entel’s data centres and Digital Realty’s acquisition of a majority stake in Teraco.”
In the US, only six of the 20 largest colocation players are now publicly traded companies.
“Since 2018 private equity funding has risen by an average 50% per year and in 2022 reached $44 billion,” says Synergy. “Since 2018 the average deal size has almost tripled, growing from $80 million to $235 million.”
The research group says 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.
These were both higher than the 2021 highlights, which Synergy identifies as the acquisitions of CoreSite and QTS, each for around $10 billion.
“These deals represent the four highest value acquisitions the industry has ever seen,” says Synergy. All four acquired companies feature in the worldwide top 16 ranking of colocation operators, while they are ranked three to six in the US market, behind only Equinix and Digital Realty.
“Prior to these four record-setting transactions, the biggest data centre 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 centres for $3.6 billion and the acquisition of Global Switch by the Jiangsu Shagang Group of China.”
This last “was eventually valued at over $8 billion in transactions that were spread over three years”, says Synergy.