With Blackstone’s QTS Acquisition, Data Center M&A Hits $23B

‘The almost inexhaustible demand for data center capacity has led to a drive to find new sources of capital funding and there continues to be a long list of willing investors,’ says Synergy Research Group’s John Dinsdale.

Data center-oriented M&A deals are reaching record-breaking heights in 2021 as investment firms continue to acquire data center operators as demand for computing capacity and space skyrockets, according to new data from Synergy Research Group.

Just this week, the largest data center acquisition in history was unveiled with global investment firm Blackstone Group entering into a definitive agreement to acquire data center provider QTS Realty Trust for $10 billion. Blackstone’s acquisition of QTS brings the total value of closed and pending M&A data center deals to more than $23 billion in 2021.

“One notable feature of the QTS acquisition is that it will be the most expensive data center deal ever,” said John Dinsdale, a chief analyst at Synergy Research Group in an email to CRN. “Why? QTS has a large data center footprint, a revenue growth rate that is well above the industry average, and a strong presence in each of the top six US metro markets, which makes it a highly valuable target.”

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Less than six months into 2021, a total of 68 data center-oriented acquisitions have already closed with a total value of $6.3 billion.

When you include all other pending data center M&A deals — such as Blackstone’s $10 billion of QTS Realty Trust which is expected to close in the second half of 2021 — total M&A data center deals this year climb to $23.1 billion.

With the explosion in data being generated and processed, along with the boom in enterprise and cloud markets, data centers are becoming “a hot ticket” in the M&A arena particularly for private equity and global financial investments firms, says Dinsdale.

“The almost inexhaustible demand for data center capacity has led to a drive to find new sources of capital funding and there continues to be a long list of willing investors,” said Dinsdale.

Private equity firms are also investing billions into data center providers to boost market reach and expand data center footprints globally.

For example, last month European data center provider startup Yondr Group unveiled plans to spend $2 billion to significantly expand its data center footprint across the Americas. The three-year-old data center startup had recently secured the $2 billion from private equity with plans to target the red-hot cloud provider market led by Google, Amazon Web Services and Microsoft, which need more data center space and computing capacity as demand for cloud services soars.

Prior to Blackstone’s acquisition announcement of QTS, the top three biggest data center M&A deals were 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 valued at over $8 billion in transactions that were spread over three years. Other multi-billion acquisitions have been carried out by Equinix, Cyxterra and EQT.

Synergy expects data center M&A in 2021 to end up matching or potentially surpassing M&A acquisition spending levels of 2020, which reached a record $32 billion.