New data from Synergy Research Group shows that 87 data center-oriented M&A deals closed in the first six months of the year with an aggregate value of $24 billion, while there is an additional $18 billion of pending deals in the pipeline that have been agreed but have not yet officially closed, most of which are expected to close before year end. After adding in the regular flow of transactions that happen with little advance public notice, 2022 is shaping up to match the record-breaking M&A activity levels that were seen last year. Synergy logged 209 deals that closed in 2021 with an aggregate value of over $48 billion, 41% up from the 2020 total of $34 billion, which itself was a record year at the time. A notable trend in the industry has been the recent influx of private funds. In the 2015-2018 period private equity buyers accounted for 42% of deal value. In 2019 to 2021, as the overall level of M&A activity ballooned, private equity share of the total deal value increased to 65%, while in the first half of 2022 private equity share has jumped to over 90%.
The highlights for this year have been the $15 billion acquisition of CyrusOne by investment firms KKR and Global Investment Partners, and the pending 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 15 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, CyrusOne, GDS, GI Partners, Keppel, Macquarie, Mapletree and NTT.
“There is an ever-increasing demand for data center capacity, driven by rapidly growing cloud markets, aggressive expansion of hyperscale operator networks and continued growth of data-rich digital services,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “The trouble is that building and operating large fleets of data centers is highly capital intensive. Even the biggest data center operators have had to seek external funding to allow them to meet growth targets while protecting their balance sheets. As the level of resulting M&A activity has shot through the roof, virtually all of the incremental investment has come from private equity.”