On August 22, Synergy Research Group announced new data that shows data center-oriented M&A deals are poised to pass $40 billion in 2024, following a lull in 2023.
Synergy reports that the aggregate value of all formally closed deals peaked in 2021 and 2022, with around $50 billion in total value of closed deals in both years. 2023 saw that value decline to $26 billion, a drop of 47%. Synergy does note, however, that the 2021 and 2022 values were influenced by four $10 billion deals: the acquisitions of CyrusOne, Switch, CoreSite, and QTS. Synergy reports that these were the biggest deals the industry has seen, and if only regular deals are looked at, the drop-off really began in 2022.
According to Synergy, deals closed so far in 2024 are valued at $36.7 billion, and deals valued at an additional $7.1 billion have been agreed upon but not formally executed. Equity investments in Vantage Data Centers and EdgeConneX have been the biggest deals closed so far this year.
The amount of private equity in the market has risen as well. Synergy reports that in 2020, private equity accounted for 54% of the value of closed deals. In 2021, it increased to 65% and has since remained in the 85-90% range.
“There has been an inexorable rise in the demand for data center capacity, driven by cloud services, social networking, and a range of both consumer and enterprise digital services,” said John Dinsdale, a chief analyst at Synergy Research Group, in a press release. “The rise of generative AI is adding a further boost to demand. Specialist data center operators have either not been able to fund those investments themselves, or they were not prepared to put their balance sheets at risk. Meanwhile, data centers are very much being viewed as long-term safe havens for investments, even during turbulent times, which has caused a huge influx in private equity. We do not anticipate that picture changing any time soon.”
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