28 Jan Private equity investors push data center M&A to new heights in 2019 – report
Last year the number of data center mergers and acquisitions deals closed passed the 100 mark for the first time, according to a report.Synergy Research Group (SRG) said the number of M&A deals were up 6% from 2018 thanks in large part to a wave of investments by private equity firms. Last year’s total was more than double the number that closed in 2016.
Over the past five years, almost 350 deals have closed. In 2019, private equity deals increased by 50%, which offset the 45% drop in deals closed by public companies. While the number of deals was up last year, the aggregate value of those deals declined due to a reduction in average deal values, which continued a trend from 2018.
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Three years ago marked a peak in average deal values thanks to three multi-billion-dollar deals and three more valued at over $1 billion each. The number of billion-dollar deals declined in 2018 and 2019.
From a historical perspective, the largest deals that have closed since 2015 were Digital Realty’s pickup of DuPont Fabros for $7.6 billion in 2017 and Equinix’s acquisition of Verizon’s data centers in 2016. In the latter deal, Verizon sold 24 data center sites to Equinix in a transaction valued at about $3.6 billion. Equinix also bought European data center provider TelecityGroup for $3.8 billion four years ago.
RELATED: Digital Realty strikes $7B deal to buy European data center operator Interxion
In October, Digital Realty announced a $7.15 billion deal to buy European data center operator Interxion. That deal is slated to close sometime this year.
Equinix and Digital Realty, which are world’s two leading colocation providers, have been the most aggressive consolidators in the data center industry segment. All told, they have accounted for 31% of the total deal value over the 2015 to 2019 period, according to SRG.
Other data center operators that have taken part in the buying binge include CyrusOne, Iron Mountain, Digital Bridge/DataBank, NTT, Carter Validus, GDS, QTS and Keppel.
“The aggressive growth of cloud services and outsourcing trends more generally are fueling a drive for scale and geographic reach among data center operators, which in turn is stimulating data center M&A activities,” said John Dinsdale, a chief analyst at Synergy Research Group, in a statement. “This has been attracting an ever-increasing level of private equity activity as investors seek to benefit from high-value and strategically important data center assets. It is also notable that even the biggest publicly traded data center operators are increasingly turning to joint ventures with external investors to help fund growth and protect balance sheets.”
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