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Data Center M&A Booms, As Enterprises Change IT Priorities

As enterprises focus more on improving IT capabilities, and less on owning data center real estate, the shift is driving a boom in data center M&A activity, according to a report from Synergy Research.

Mitch Wagner

January 5, 2018

3 Min Read
Data Center M&A Booms, As Enterprises Change IT Priorities

Data center mergers and acquisitions boomed to $20 billion in value in 2017, exceeding the previous two years combined, as enterprises "focused more on improving IT capabilities and less on owning data center assets," according to a report from Synergy Research Group.

One significant M&A deal closed every week on average last year, with the largest being Digital Realty Trust Inc. 's $7.6 billion DuPont Fabros acquisition, according to a statement from Synergy Research Group Inc. this week. (See Data Center M&A Hit $20B in 2017 – Report and Digital Realty Deal a Strategic Expansion.)

Four other deals were valued at $1 billion or more, involving acquisitions by Equinix Inc. (Nasdaq: EQIX), Cyxtera Technologies , Peak 10 Inc. and Digital Bridge Holdings , Synergy Research said. Some 48 deals closed in 2017, compared with 45 in 2015 and 2016 combined.

Figure 1: Photo by Leonardo Rizzi (CC BY-SA 2.0) Photo by Leonardo Rizzi (CC BY-SA 2.0)

And 2018 is already off to a brisk start -- as of Tuesday, with the year in its second day, there were four additional major deals agreed to but not yet closed, with a total value of over $2.6 billion, Synergy Research said.

Digital Realty and Equinix, the world's two leading colocation providers, were the biggest investors in 2015-2017, according to the analyst report.

"Above all else, what is driving the data center M&A activity is enterprises focusing more on improving IT capabilities and less on owning data center assets," John Dinsdale, a chief analyst and research director at Synergy Research, said in a statement. "That shift is driving huge growth in outsourcing, whether it is via cloud services, or use of colocation facilities, or sale and leaseback of data centers. The dramatic growth of cloud providers is also driving changes in the data center industry, as data center operators strive to help them rapidly increase scale and global footprint. We expect to see much more data center M&A over the next five years."

Figure 2:

Not only is M&A activity booming for data centers, but the facilities themselves are proliferating. The end of 2017 would see nearly 400 hyperscale data centers around the world, with nearly half of them -- about 44% -- in the US, according to a December 20 report from Synergy Research. (See Hyperscale Data Centers Continued to Grow in 2017.)

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About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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