$16bn of data centre M&A deals closed in 2018

15 January 2019 | Jason McGee-Abe

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The volume of data centre M&A deals grew to $16 billion in 2018, according to Synergy Research Group data.

Despite the number of significant data centre-oriented M&A deals continuing to climb in 2018, which saw 68 deals close, the total value of deals that closed actually dropped off from its 2017 peak.

“There is a clear trend towards enterprises not wanting to own or operate their own data centres, as CIOs focus more on features and services that they can provide to their internal clients and less on the complexities of running data centres,” said John Dinsdale, a chief analyst and research director at Synergy Research Group.

“As enterprises increasingly look to various outsourcing options, this is driving specialist data centre operators to increase both the scale and the reach of their data centre footprint. This bulking up is often best accomplished, or speeded up, by acquiring other data centre operators. We expect to see a lot more data centre M&A over the next five years.”

The data centre and colocation industry is being driven by the twin forces of enterprises trying to minimise investments in their own data centre assets and by the booming growth of cloud service providers who need to rapidly extend the scope and scale of their data centre footprint.

The total value of M&A deals that closed over the 2017-2018 period was more than double that of the previous two years, which reveals the real underlying trend.

While the 2018 figures included five billion-dollar-plus deals, none approached the scale of the 2017 $7.6bn acquisition of DuPont Fabros by Digital Realty or the $3.6bn Equinix acquisition of Verizon’s data centres.

The largest 2018 deal was the sale of a 25% stake in Global Switch to a group of Asian investors, which was valued at £2.1 billion or around $2.8 billion. The other four deals that were valued at a billion dollars or more involved acquisitions by Digital Realty, Iron Mountain, GTT and Brookfield Infrastructure Partners.

There were another 18 deals that were valued in the $100 million to $1 billion range, and 45 smaller deals that were each valued at up to $100 million. The total value of M&A activity over the 2017-2018 period was over double the total for the previous two years.

Over the 2015-2018 period, by far the largest investors have been Equinix and Digital Realty, the world’s two leading colocation providers. In aggregate they spent almost $23 billion on acquisitions of data centre operators, accounting for 40% of the value of M&A deals that have closed. Both Equinix and Digital Realty have made major acquisitions in all four regions of the world.

Other notable data centre operators who have been serial acquirers, include: CyrusOne, Iron Mountain, Digital Bridge/DataBank, NTT and Carter Validus.