Datacentre M&A closed deal values exceed last year’s total just three months into 2020

The datacentre market is already amidst a record-breaking year for mergers and acquisitions (M&As), with the value of deals closed during 2020 already exceeding the year total for 2019.

According to the latest market tracker data from IT analyst house Synergy Research Group, the first 16 weeks of 2020 have seen a series of multimillion and billion-dollar datacentre acquisitions close, with an additional 17 or so predicted to play out by the year-end.

As a result, 2020 is significantly bucking M&A trends of recent years, whereby the volume of datacentre acquisitions has surged, while the aggregate value of these deals has declined.

A major cause of this sudden uptick in deal volumes is the closure of Digital Realty’s $8.4bn mega-merger with Interxion at the start of 2020, said John Dinsdale, chief analyst at Synergy Research Group.

However, the closure of a deal of that size and stature is unlikely to be an isolated event in 2020, as there are already a number of other sizeable mergers on the horizon, as well as two other billion-dollar-plus deals that have already completed this year, he said.

Synergy has also identified two other deals that completed in 2020 and were valued at more than $500m, and said a further 28 datacentre-orientated M&A deals have already closed this year.

“The last four years have seen a surge in the volume of datacentre deals, but in the last two years, the aggregate value dropped due to a relative lack of mega-deals,” said Dinsdale. “Digital Realty helped to fix that by closing the biggest-ever datacentre acquisition.

“There have been a few other large deals closed as well, with more awaiting formal closure and other possibilities in the pipeline.”

Much of this activity is being driven by the continued appetite for colocation capacity from the hyperscale cloud and internet firms, which is on course to increase as the Covid-19 coronavirus pandemic continues to play out, said Dinsdale.

“Outsourcing trends and the aggressive growth in cloud services are driving ever-growing demand for datacentre capacity, which in turn is fuelling both industry restructuring and a need to find new sources of investment capital,” he said.

“This will be a bumper year for datacentre M&A activity. In less than four months, the M&A value has already surpassed 2019, in addition to which, we are aware of 17 more agreed deals that are pending closure, plus a few other potential multibillion-dollar deals.”

Since the start of 2015, a total of 388 datacentre M&A deals have closed, totalling $90bn in value, with Synergy flagging colocation market giants Digital Realty and Equinix as the two biggest acquirers and investors. “In aggregate, they account for 35% of total deal value over the period,” it said.