Private equity investors continued to shape datacentre market M&A activity in 2022

Private equity investors are continuing to strengthen their hold on the global datacentre market, as confirmed by data published by IT market watcher Synergy Research Group.

Its research shows 187 mergers and acquisitions (M&A) totalling $48bn occurred in the datacentre market during 2022, and private equity accounted for more than 90% of this deal value.

Furthermore, 10 of the 12 largest M&A deals to have occurred in the sector over the past 12 months have involved private equity buyers.

This is markedly up on 2021, when private equity accounted for 66% of the record-breaking $49bn of M&A activity that occurred, and is also higher than in 2020, when private equity featured in 55% of deals. “Since 2019, the annual value of private equity-funded datacentre M&A deals has more than tripled to $44bn in 2022,” said Synergy, in a research note.

This is because datacentre operators are requiring far larger sums of money now to complete these deals so they can build out the datacentre capacity needed to deliver on the growing global demand for cloud and digital services. For instance, as stated by Synergy, the average M&A deal size has almost tripled from $80m to $235m since 2018.

To put these figures into further context, in 2019, Digital Realty’s $8.4bn takeover of fellow collocation provider Interxion was considered a record-breaking mega-merger, but in 2022, this was dwarfed by the $15bn takeover of CyrusOne by investment firms KKR and Global Investment Partners.

“Datacentre operators [are] struggling to fund growth opportunities via internal funding, [and] these trends are not going to change anytime soon,” the research note continued. “Datacentres are being view as long-term safe havens for investments, even during turbulent economic times.”

There are several reasons for this, as previously documented by Computer Weekly. Datacentres are considered as being an asset class that can provide a strong, long-term source of recurring revenue for investors because clients typically lease them for long periods and tend to take on increasing amounts of a facility’s capacity over time.

To this point, colocation capacity remains in high demand across the globe, as enterprises look to shutter their own datacentres, while the hyperscalers seek out additional sites to host the cloud and internet-based services they offer.

At the same time, it’s also understood that a lot of the investors that are now flocking to the datacentre market are those that have experience of funding real estate and commercial property developments that are looking to diversify their portfolios, particularly if their previous investments have focused on bricks and mortar retail sites that have taken a hammering since the pandemic.