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2020 is a ‘bumper year’ for data center M&A – between Covid-19 – as value surpasses 2019 total

Datacenter real estate remains an extremely valuable asset if the 2020 deal figures so far are anything to go by – with Covid-19’s impact on cloud services expected not to weaken the market.

According to the latest record from Synergy Research, the mergers and acquisitions of data centers (M&) in the first 4 months of this year surpassed the total in 2019.

The main reason for this increase is because the ‘big deals’ have returned to fashion: Interxion’s $8.4bn (£6.8bn) acquisition of Interxion by Digital Realty, the largest data center deal ever, closed earlier this year, while Synergy identified two other deals for a fee of $1bn, as well as two other deals valued at more than $500 million.

2020 to be a ‘bumper year’ for data centre M&A – amid Covid-19 – as value surpasses 2019 total
2020 to be a ‘bumper year’ for data centre M&A – amid Covid-19 – as value surpasses 2019 total

Digital Realty and Equinix, the two largest position providers, are by far the largest investors in the sector, with an estimated 35% of the total transaction value between them since 2015.

Last year saw the highest number of data center M& deals, breaking 100 for the first time, but 2017 remained the largest total, the only year to break a total of $20 billion. Current figures for this year are closing at less than $75 billion from 28 transactions. Synergy said that 2020 will be a ‘bumper year’ for data center M&A operations, with cloud services continuing to increase demand for capacity.

This is taking into account the potential effects of the Covid-19 epidemic on the market. While some industries are having bleak prospects – last month, IDC warned of a serious setback to the market for refolds – demand for cloud-based software and infrastructure will not fall due to coronaviruses.

John Dinsdale, a key analyst at Synergy Research, said while Covid-19 will negatively impact many IT hardware markets, the software market will be less difficult, while some service markets ‘may get a bit stimulated.’ Collaboration tools and digital entertainment have clearly seen a shift – with an increasing number of data points to prove this – while more workloads are being pushed to the public cloud as businesses seek to mitigate issues that are affecting their internal operations.

Dinsdale told CloudTech: “Some business-oriented markets will be pretty badly affected [while] the consumer IT market will be a mixed one, but there will be some positive direction in different sectors.” The service offering market will be a mixed one and there will be some financial conservativism, but basically, the traffic has increased.

“Cloud providers will actually do pretty well when Covid pushes more users online and onto the public cloud,” he added. “Demand for data center capacity will continue to grow through all, primarily on the service provider and cloud side.”

Dinsdale adds that part of this optimism is due to the solid positions, both financially and market share, that hyper-level cloud providers currently enjoy. “The fundamental changes we are seeing in social and business behavior will actually provide some appropriate direction for many of these businesses,” he said. Large-scale companies are much better able to withstand the current crisis than most others, and we expect to see strong investment going on.

Synergy added that it was made known about 17 other completed transactions pending closure, along with many ‘potentially billions of dollars’ worth of transactions in the process.

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