DCF Podcast: Data Center Merger Mania: Updates on Digital Realty, CyrusOne

The Data Center Frontier Show podcast tells the story of the data center industry and its future. Our podcast is hosted by Rich Miller, editor of Data Center Frontier, who is your guide to the ongoing digital transformation.

DCF Podcast Episode 4: Data Center Merger Mania Updates on Digital Realty, CyrusOne

Everyone’s talking about data center merger mania. In this episode, host Rich Miller talks about two deals, one that happened and one that didn’t. The deal that happened is Digital Realty’s acquisition of European colocation and interconnection provider Interxion for $8.4 billion dollars. Rich discusses the important strategic factors that make this deal a win for Digital Realty.

There’s also the deal that didn’t happen — involving CyrusOne, one of the largest wholesalers in the data center business. In its earnings call, CyrusOne has decided to remain independent. Both of these deals have strategic implications for the data center industry.

Resources:

DCF Coverage of Digital Realty’s acquisition of Interxion
Stories on Digital Realty
Stories on CyrusOne

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Sponorship and Contacts:

Our first season of the Data Center Frontier Show is sponsored by T5 Data Centers. For future  advertising opportunities, contact Kevin Normandeau at [email protected]. For feedback and questions about the podcast, contact Rich Miller at [email protected].

Episode Outline

It is deal time in the data center industry. Everyone’s talking about data center merger mania. And today we will be talking about two deals, one that happened and one that didn’t.

The deal that happened is Digital Realty’s acquisition of European colocation and interconnection provider, Interxion for $8.4 billion dollars, which is a record for a data center transaction. There’s also the deal that didn’t happen. That’s one involving CyrusOne, one of the largest wholesalers in the data center business. CyrusOne had been the focus of takeover rumors for a number of weeks. In its earnings call, CyrusOne has decided to remain independent.

Both of these deals have strategic implications for the data center industry.

Digital Realty – Buying Interxion helps Digital Realty in a couple of important ways. The first is geography. Europe has become one of the most important markets for data center companies.  Interxion is in 11 different markets and has 53 carrier neutral data centers. There is a particular strategic importance of what’s known as the FLAP market – Frankfurt, London, Amsterdam, and Paris – these are the most important cities for enterprises and huge hyperscale customers.

Interxion is perhaps the largest player in the Frankfurt market and has substantial operations in Amsterdam and Paris. Digital has presence in London but less in these other cities on the continent. Dublin is also a strategic market as its become one of the largest hyperscale markets in Europe. So some people add D to FLAP for FLAP-D.

4:09: The other important strategic point here is that Interxion has been a major player in the interconnection market in Europe. The Internet is a network of networks. Digital Realty has been building its interconnection network over a series of years.

5:20: Interxion helps Digital Realty extend that interconnection and colocation focus to the markets in Europe and so begins to round out their offerings. There is also land owned by Interxion, which allows for future expansion.

6:01: The final strategic consideration is one that deals with geographic strategy – Interxion has built a data center campus in Marseilles, France, which is an important gateway to markets in Africa and the Middle East.

6:40: What does this deal tell us about the landscape for competitive mergers and acquisitions? Infrastructure funds and sovereign wealth funds are interested in these data center deals.

8:48 – Sponsor break

10:05: “We are not currently pursuing a sale of the company.” With those words, CyrusOne put to rest the rumors of attempts to buy the company. The leadership of CryusOne said in their quarterly earnings call they will continue to build value for their shareholders.

12:00: There’s been additional media speculation about several other companies in the sector going through evaluation of options or sale process. Specifically, Internap is working wtih starategic advisors to scale up and compete. Regional players TierPoint and EdgeConneX have both mentioned as appealing to potential acquirers.

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