Cloud demand fuels 18% rise in colocation M&A activity in first half of 2019

The first half of 2019 has seen a marked resurgence in the datacentre market’s appetite for mergers and acquisitions (M&A), with 52 deals concluded in the six months to 30 June 2019.

That figure is not only 18% higher than the number of M&A deals closed during the first half of 2018, but is also higher than the total number of buyouts in the whole of 2016, according to data compiled by market watcher Synergy Research Group.

In response to the figures, the analyst house predicts that 2019 is on course to become a record-breaking year for M&A activity in the datacentre colocation space, given that its data shows eight more deals have closed since the start of July. There are also 14 deals that have been agreed but are yet to close, which will add to the year-end total.

John Dinsdale, chief analyst at Synergy Research Group, said the uptick in M&A activity is being driven by enterprises’ growing appetite for public cloud services, and demand from colocation providers for capacity to accommodate the needs of the hyperscale cloud firms.

“An ever-increasing number of enterprises are trying to ditch their own physical datacentre facilities, which is helping to fuel the M&A boom,” he said.

“Meanwhile, the leading colocation providers are on a charge to grow their global footprint of datacentres in order to better serve both enterprises and cloud providers.”

Synergy’s data also shows that most of the M&A activity playing out in the market is being driven by colocation giants Digital Realty and Equinix, which, in aggregate, are responsible for 36% of the deals that have closed over the past four years.

Over that period, more than 300 M&A deals have taken place, with an aggregate value of $65bn, according to Synergy’s count.

But although the number of deals has increased, 2019 is yet to see a multibillion-dollar M&A deal, which is markedly different from previous years, with 11 deals in that value range taking place in 2017-2018.

Even so, Dinsdale said the data suggests the level of M&A activity in the datacentre industry is only going to increase over the coming years, as demand for cloud services continues to soar.

“As enterprises either shift workloads to cloud providers or use colocation facilities to house their IT infrastructure, more and more datacentres are being put up for sale,” he said.

“This, in turn, is driving change in the colocation market, with industry giants on a never-ending quest to grow their global footprint and a constant ebb and flow of ownership among small local players. We expect to see a lot more datacentre M&A over the next five years.”