The Blackstone acquisition of QTS Realty for $10 billion is the biggest deal ever for the data center industry. We highlighted the potential for these type of huge M&A deals in DCF’s 2021 forecast, noting the massive investor interest in funding the growth of digital infrastructure. With so many players, it amplifies the role of FOMO – the Fear of Missing Out. Here’s some thought on the Blackstone-QTS deal, what it means for data center M&A, and what comes next.
Listen to today’s show:
Here are some resources that tie into our discussion:
- Blackstone to Acquire QTS in Blockbuster Data Center Deal: Blackstone Infrastructure Partners will acquire QTS Realty Trust for $78 a share, valuing QTS at approximately $10 billion, the two companies said today. QTS operates more than 7 million square feet of data centers across North America and Europe.
- Data Center M&A on the Horizon as New SPACs Go Shopping: More data center mergers and acquisitions (M&A) appear likely amid reports of two new special purpose acquisition corporations (SPACs) featuring teams of data center executives. Meanwhile, the industry’s busiest consolidator is raising a huge new round of capital.
- Pandemic Could Drive Data Center M&A, Reshaping Industry Landscape: Economic disruptions are times of both peril and opportunity. We look at how the COVID-19 pandemic may impact the active world of data center mergers & acquisitions. Financial strength will drive the action.
Be sure to check our our free Annual Forecast, outlining the DCF take on the most important trends to watch this year:
The QTS Data Centers Shellhorn DC-1 project in Ashburn. (Image: QTS)
That, of course, is what we’ve seen with Blackstone and QTS. QTS has more than 7 million square feet of data center space across North America and Europe and thus is a both a pretty big bite financially but also a big way to get into the industry. This deal highlights some of what’s been changing in data center M&A. We typically have a couple of kinds of buyers – they could include strategic buyers who are companies operating in the space, who want to expand geographically or add new capabilities or different kinds of lines of business. Then you have financial buyers, which includes these global investors that have been flooding into the industry.
As deals have gotten more expensive and valuations have grown, it’s made it a little harder for the private equity players and strategic players to compete. So what do things look like going forward? An interesting wrinkle in the QTS deal is that there is a “go shop” provision that allows them to field offers from other suitors for another 40 days. Could there be a higher bid for QTS? The bar has been set really high with that $10 billion dollar valuation.
Could QTS play a strategic role in another provider’s operations and plans going forward? Might one of these large global investors feel like they have to to have the opportunity to get into the market and see paying more for QTS as an option? Stay tuned as we continue to watch this drama.
And look for more large acquisitions in the data center sector, which is reflected in the Wall Street trading on Monday, as the shares of companies like CyrusOne and Coresite were bid up by about 6 percent as folks on on Wall Street wondered whether we might see additional acquisitions, perhaps with financial players coming in and buying some of these remaining firms and taking them private.
What’s coming next? It’s too early to say, but we’ll be keeping an eye on all of the happenings in the industry at Data Center Frontier. If you want to stay informed, subscribe to our newsletter which will share all of our latest headlines and insights with you, and follow us on LinkedIn.
