NEW YORK, Feb. 20, 2020 (GLOBE NEWSWIRE) -- Asset classes within the communications infrastructure sector are as dynamic as they are sought after, with datacenters proving no exception. Growth rates, whether in terms of valuation or international or domestic expansion, both organic and in-organic, are continuing to spike and datacenters are right at the top of the list for investors.
Last year, TMT Finance reported on 76 datacenter deals globally, with a total valuation of roughly US$57.8bn. Some of the biggest and most interesting deals included Digital Realty’s agreed take-private of Netherlands-based InterXion, as well as DLR’s and Brookfield’s takeover of Brazil-based Ascenty; Telefonica’s offload of its US-, Latam- and Spain-based datacenter portfolio; and the seesawing situation surrounding a deal for Virginia-based datacenter giant EdgeConneX, reportedly valued at US$2.5bn, with TMT Finance exclusively reporting on all four.
New types of investors
As datacenters grow and mature as an asset class, the pool of potential investors is changing. This space is now attracting interest from parties that have traditionally been under-invested, such as sovereign wealth funds, pension funds and infrastructure funds, who are looking to allocate capital to mission-critical communications infrastructure.
According to Digital Realty’s CFO Andy Power, these funds recognise the value of a global platform, customer relationships, and an established track record of operational excellence. Which is why, to date, they have largely co-invested alongside strategic players.
“These funds certainly bring another bid to the datacenter auction tent and we believe their relatively recent interest in datacenters validates our long-term investment thesis and underscores the tremendous growth potential of the digital economy,” he said.
Secondary markets
The strong growth in data consumption and demand for data storage will continue to drive demand for datacenter capacity. However, according to Raul K. Martynek, CEO of DataBank, much of the demand is now coming from secondary markets, where outsourcing options are becoming more popular. As such, his company is focused on datacentre and colocation facilities in markets such as Dallas, Atlanta and Pittsburgh.
“During the first couple years of datacenter construction, supply went to primary markets like New York and San Francisco, who understood the value of outsourcing first,” explained Martynek. “But as secondary markets advance digitally, the need to deploy production workloads closer to their locations will increase.”
Little wonder regional investment and consolidation in the datacenter market has soared in recent years. Deals exclusively reported on include the sale of Expedient Data Center to AMP Capital and Compass Datacenter’s acquisition of Montreal-based ROOT taking centre stage – both of which had the eventual buyers exclusively named by TMT Finance.
Meeting demand for hyperscalers
According to Jared Day, president and CFO of Compass Datacenters, of all the customer segments within the datacenter space, the hyperscale customer segment is growing by far the fastest.
“Enterprise datacenters are still around, but they're not as good with things like migration to the cloud. So, the hyperscalers are driving the lion's share of the growth, especially in North America," he said. "However, these companies have an appetite to do business with smaller providers in order to meet capacity. Especially, as demand grows outside of the US.”
While this trend is nothing new, Day believes it is changing. He believes hyperscalers want to work with fewer providers than before.
“They don’t want to put all their eggs in one basket, but they want to move away from partnering with dozens of providers. This is why companies like ours and others in the space need to achieve scale and become global platforms.”
Martynek and Day are speakers at the upcoming TMT M&A Forum USA 2020 (March 31, New York). The event, sponsored by Bank Street Group, Tillman Infrastructure, MVP Capital, Princeton Growth Ventures, Santander, Greenberg Taurig LLP, Lazard and WIS gathers 350 leaders and M&A professionals to discuss how M&A is driving change in telecom, digital infrastructure and cloud services. Confirmed C-Suite speakers include GTT, Verizon, Sprint, Liberty Latin America, Uniti, zColo, DataBank, Everstream, Intel, Goldman Sachs, EQT, Microsoft, Netrality, KKR and many more.
Prices increase on February 21, 2020. To book your place, please tmtfinance.com/usa/register
For more information about TMT M&A Forum USA 2020 please visit tmtfinance.com/usa or contact enquiries@tmtfinance.com for speaker and sponsor opportunities.
About TMT Finance
TMT Finance launched in 2009 to connect and inform senior executives pursuing M&A, investment, financing and advisory opportunities in the telecom, media and tech sector globally. Since then, TMT Finance has established 5 weekly news titles with a series of leading annual executive only events gathering financial-decision makers across the world.
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