As Two of the Top Four US Data Center Operators are Acquired, M&A Pushes Towards New Heights
RENO, NV, November 15, 2021
It has been announced that both CyrusOne and CoreSite are to be acquired in deals valued at $15 billion and $10 billion respectively, making them the biggest seen in the data center industry so far. With the news of these pending acquisitions, the level of data center M&A activity is pushing towards new heights. As at mid-November, the total number of deals closed so far this year has already far surpassed the record number closed last year. While the total value of deals closed so far this year has not yet reached 2020 levels, the CoreSite acquisition is expected to officially close before the year end putting the 2021 deal value at least 16% ahead of last year. With several other deals agreed but awaiting official closure, the final 2021 number could be higher still. It is significant that CyrusOne and CoreSite are the third and fourth largest US data center operators, ranked by colocation and data center revenues, while the fifth and sixth ranked companies, QTS and Cyxtera, both also changed hands earlier this year. While CoreSite and QTS are almost entirely focused on the US market, both CyrusOne and Cyxtera have some substantial international operations. Ranked by worldwide revenues, CyrusOne, Cyxtera and CoreSite are all in the top ten. CoreSite is being acquired by American Tower in its first truly significant move into the data center market. CyrusOne is being acquired by investment firms KKR and Global Investment Partners. With a continued boom in demand for data center capacity, the high valuations were driven by both firms having a large data center footprint and a strong presence in many of the most important US metro markets. Prior to these announcements, the biggest data center M&A deals were Blackstone’s acquisition of QTS for $10 billion, Digital Realty’s $8.4 billion acquisition of Interxion, Digital Realty’s $7.6 billion acquisition of DuPont Fabros, 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. Some of the other most notable acquirers have been Equinix, EQT, Digital Bridge (Colony), CyrusOne, GDS, Macquarie and Mapletree.
“Hyperscale operators continue to aggressively expand their operations, while both enterprise and consumer oriented cloud markets keep on growing rapidly. This is driving an ever-increasing need for data center capacity,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “The level of data center investment required is too much for even the biggest data center operators, causing an influx of new money from external investors. In quick succession ownership of four of the top six US data center operators has changed hands, while the two biggest names in the industry – Equinix and Digital Realty – are increasingly turning to joint ventures to help fund their growth. Over the last 18 months there has been a very notable shift in buyers with private equity investors becoming a lot more active than data center operators.”
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