I must have stared at a blank page for five minutes, thinking of how to start this blog. Anyone with a pulse in this industry has seen just how active it’s been in terms of mergers and acquisitions. And based on the most recent trends, none of this is slowing down.

These massive capital outpours for digital infrastructure are happening for a reason—actually, a few reasons.

First, in the latest DataCenterHawk report­, we see what’s happening in our industry. The 463 MW of 2Q 2022 demand in the North American data center region marks another strong period of growth. As a result, the North American primary market vacancy is now averaging 4.4%, its lowest point ever. High demand and low vacancy rates are a good representation of where the overall market in the U.S. and Canada sit today. In places like Northern Virginia, that vacancy rate is around 1% – which might as well be nothing.

There is a desperate run for capacity, and our industry literally cannot deliver fast enough where demand is significantly outpacing supply. So, you’ll see different tactics to purchase land, supply, and even entire digital infrastructure organizations.

You might say, “Bill, data centers have been around for a while. And there have been data center companies around for a while too. So why now? It can’t all just be about capacity.”

You know what, informed reader? You’re right. Investor interest in digital infrastructure will continue to remain very high. And this is despite the current challenges facing the global economy, supply chain issues, and even the war in Ukraine. Oh, and in case you forgot, the COVID-19 pandemic also has something to do with the mass run on M&A activity. Remember, after the pandemic, practically every business raced to keep pace with the shift to a digital economy. All these “digital transformation” trends require infrastructure. Basically, this translates to data centers remaining core and central to this vision.

So, what’s changed from legacy data centers to modern ones? Savvy and intelligent investors see data centers as one of the best ways to make money and invest in a solid long-term asset. These investors see a very real chance to gain strong returns by investing in the infrastructure to power the digital economy. 

The world is actively adding data center capacity at an unprecedented rate. Investors all want a part of that. How much does that account for? Since 2016, this industry has seen about $90 billion in transactions. The largest ones happened just over the past year or so. Here are the top 5:

1. $15 Billion: Investment giants KKR and Global Infrastructure Partners acquire data center developer CyrusOne for $15 billion in Nov. 2021, taking the company private

2. $11 Billion:DigitalBridge and infrastructure investor IFM will buy Switch for $11 billion and take the company private in an all-cash transaction in May 2022.

3. $10.1 Billion: American Tower Corporation will buy data center developer CoreSite for $10.1 billion, making a bold move into the data center business. American Tower is the world’s largest owner of wireless infrastructure.

4. $10 Billion:Blackstone Infrastructure Partners acquires QTS Realty Trust in a deal completed in October 2021.

5. $8.4 Billion:Digital Realty acquires European data center specialist Interxion in 2019, adding scale in Europe and kick-starting a sharper focus on interconnection services.

And, to keep this article up-to-date, just this past Friday, EdgeCore announced that it has been acquired by Partners Group, which said it will invest $1.2 billion to acquire EdgeCore and its existing data center assets and “fund the acquisition and development of data centers in new markets.”

With all of this activity, you might wonder what happens when a large data center company is acquired. Well, let’s explore that for a minute.

Your data center just got bought. Congrats! Now what?

One thing you’ll notice is that the purchasing of a data center company is going to be a bit different than someone going out and buying a KFC franchise, for example. Many of the latest acquisitions in the data center space are high-quality assets that don’t need much changing. However, they need additional capital and the capability to build more facilities parallel to existing projects. So, let’s look at a few things that might happen when an acquisition happens.

1. You get more capital! Lots more. You’ll get access to more lending, private equity, and more opportunities to expand the business. This is a great way to help a company jump on new opportunities.

2. You might go private. No more filings or analyst calls! And, no more SEC reviews or audits. It’s a considerable weight to discard as companies can now be much more agile in their business planning. While going public is a great way to raise valuation and capital, it can sometimes become challenging. Going private helps a company react much faster to market dynamics while still having the capital to spend.

3. Yes, there might be some restructuring. I have to keep this one on the list. If you’re merging with another company, there may be a chance for job redundancies. A company that gets acquired will be reviewed to make sure it’s operating as optimally as possible. If the company is merging with another organization, be aware that some restructuring will probably happen. However, the healthier and more robust the organization, the less likely that good talent will be let go.

4. You’ll be in a more prominent family! This part is actually really cool. In many cases, you become a part of a more significant portfolio! I know that’s something that’s happening with my organization right now. It’s wonderful to share ideas, work with peers, and become a part of a more prominent family of digital solutions. In many cases, this will open your ability to do business and grow.

5. You’ll start to see more growth … fast. On that note, an M&A acts as an accelerator for growth. With the new capital, project speed will increase, and more parallel deployments will happen. Again, this is all goodness. Instead of barely keeping pace with demand, a new infusion of capital will allow a digital infrastructure company to better align with market demand and supply metrics.

I know there are a LOT of other things that might happen. However, if you’re a healthy digital infrastructure company, the goal of the company that’s doing the acquiring is to ensure they keep talent and maintain operations. Basically, let’s keep the engine and chassis the same and only upgrade the wheels.

What’s next? Who is left to buy?

The latest M&A is the EdgeCore acquisition. And this continues the wave of M&A action in the data center industry. In 2022 alone, we saw $47 billion of transaction value already happen. The Partners-EdgeCore investment should put 2022 very near the industry record for an annual M&A of $49 million from 2021, according to Synergy Research. 

The crazy part is that there are still several data center companies, some of which are pretty large. I wouldn’t be surprised to see more M&A activity as investors actively try to go after the primary, secondary, and tertiary markets. After all, we all need to connect in one way or another. My take on all this? I think this is great for our industry. The activity represents healthy growth and an apparent willingness for investors to invest in a more connected future. I also don’t think the pace of our industry will slow down. So, be ready for more headlines.