Why The Coronavirus Isn’t Slowing Down Data Center M&A

‘This will be a bumper year for data center M&A activity. In less than four months, the M&A value has already surpassed 2019,’ says John Dinsdale, a chief analyst at Synergy Research Group.

It has taken less than four months of 2020 for the value of closed data center deals to surpass the total for all of 2019, according to new data from Synergy Research Group.

Although the coronavirus pandemic is “hitting economies hard,” software markets will generally be less impacted and some services markets will actually feel some “tailwinds and might get a bit of stimulus,” said John Dinsdale, a chief analyst at Synergy Research Group, in an interview with CRN.

“Outsourcing of IT and the aggressive growth in cloud services are driving ever-growing demand for data center capacity and COVID-19 will actually accentuate that trend,” said Dinsdale. “This in turn is driving M&A thanks to industry restructuring and a need to find new sources of investment capital.”

[Related: Alibaba Aims To ‘Speed Up’ COVID-19 Recovery With $28 Billion Data Center Investment]

A total of 28 data center-oriented M&A deals have closed so far this year with a total valuation of approximately $15 billion. There are 17 more agreed deals pending closure in addition to several potential multi-billion dollar deals, according to Synergy.

Last month, the biggest data center deal in history took place with Digital Realty’s $8.4 billion acquisition of Interxion. Other large data center acquisitions completed this year include Macquarie Group’s infrastructure arm buying an 88 percent stake in AirTrunk for roughly $1.7 billion, as well as EQT and Digital Colony purchase of Zayo for a data center share total value of $1.4 billion.

“This will be a bumper year for data center M&A activity,” said Dinsdale. “In less than four months, the M&A value has already surpassed 2019.”

Dinsdale said cloud and service providers will do quite well as COVID-19 pushes more users online and onto public clouds as the demand for data center capacity increases.

“There will be a lot more activity via remote tools and apps which will serve to ramp up network and service traffic – think collaboration tools, file sharing, e-commerce, digital entertainment, streaming, etc.,” said Dinsdale. “There is now plenty of information and data points emerging about substantial increases in remote working, Internet traffic, time spent online, streaming, videoconferencing, cloud gaming and number of devices connected to home Wi-Fi. There have been big increases in [Cisco] Webex, Netflix installs, YouTube, YouTube Gaming, Zoom, Twitch audience, etc.”

Since 2015, the largest deals to be closed are the acquisitions of Interxion and DuPont Fabros by Digital Realty, the acquisition of Global Switch by a group of Chinese investors and the acquisitions of Verizon data centers and Telecity by Equinix.

From 2015 to 2020, Equinix and Digital Realty have been the largest M&A buyers. In aggregate, they accounted for 35 percent of the total deal value over the past five year.