Living on the edge: Surging demand for data centres underpins M&A boom

Data InsightDealspeak 30 May

Living on the edge: Surging demand for data centres underpins M&A boom

In an era where data reigns supreme, businesses looking for secure and scaleable storage solutions have turned data centres into a powerhouse in telecom infrastructure. An unprecedented surge in demand for cloud and edge computing infrastructure has formed the bedrock of the sector's steady cashflow. 

Investors have taken note, leading to soaring valuation metrics. Some owners have decided to put data centres on the block to capitalise on these great market conditions, while others are biding their time.  

Data4, the Paris-headquartered European data centre operator, which was put up for sale by its owner AXA IM Alts, in April inked an agreement to be acquired by Brookfield [NYSE:BAM] in a deal which valued the company at around EUR 4bn, as reported

Because the deal was only reported by a newswire and has yet to be officially confirmed, it isn't included in Mergermarket's log of deals that have been completed in the year to date. This registers eight deals worth a combined EUR 29m. 

The pipeline of ongoing and expected deals in the coming year is tipped to well-exceed the EUR 2.6bn worth of deals recorded in FY22.

Ark Data Centre’s owners Elliott Investment Management and Revcap explored a sale of the UK data centre operator. The mooted GBP 4bn (EUR 4.6bn) sale was recently put on hold, with a view to re-explore a sale following an uptick in financing markets. 

Elsewhere, UK-based centre provider Global Switch, which was put up for sale last year by its owner Chinese steelmaker Jiangsu Shagang Group, is another candidate for a future deal said to be in talks with EQT over a multi-billion-pound sale, as reported

Blind data-ting

Europe’s telecom operators, also realising the valuation capabilities of data centre assets, have also increasingly begun exploring carve-out opportunities to unlock value in prize assets.

Among those looking to capitalise on the booming trend is Altice, which launched a sale of its French and Portuguese data centre sites earlier in the year in a Perella Weinberg-led sale, as reported. Infrastructure investor Digital Bridge [NYSE:DBRG] also engaged UBS to explore selling its stake in Vantage Data Centres in a deal that could value the asset at over USD 1.5bn.

Joining the fray also includes French telecom group Iliad [EPA:ILD], which is also expected to mull options for its data centre subsidiary Scaleway, in a deal that could take place later this year, as reported.

Hard-driving bargains

Rising demand also brings strains. The bottleneck of activity has also seen operators increasingly seek out external capital to be able to hyperscale and compete with so-called FAANG cloud vendors who compete on operating margins. FAANG vendors include Amazon Web Services and Google Cloud, which are part of Amazon [NASDAQ:AMZN] and Alphabet [NASDAQ:GOOGL], respectively. 

Among those operators who could look to raise external funding could include Swiss data centre operator Green, a banker following the sector told Dealspeak EMEASuch a process would follow a flurry of Nordic data centre deals in recent years including EQT-Infrastructure’s Global Connect minority investment from Mubadala last year.

Other potential data centre owners to explore new investments could also include hyperscale provider EdgeConneX and UK-based colocation provider Safehosts in the coming months, the banker suggested 

In this data-demanding climate, the appetite for investors to capture a byte-sized piece in data centres is expected to be RAM-ped up in the coming months.

Did you see last week's Dealspeak EMEA?

Cavalry arrives: Carve-outs to the rescue

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