More DICE Coverage: M&As

The data center market is seeing an increasing amount of interest from lenders and institutional investors after years of fear, says CapitalSource leverage finance director Rashad Kawmy (left), who spoke on the M&A panel at Bisnow’s Data Center Investment Expo this week in Tysons. The interest from lenders is a change from the last decade when the financial community found the space daunting. Now there’s an understanding of why it’s critical to the economy. The trend means that valuations are up, making it a great time for sellers. Brumer Law Group founding principal Ari Brumer (right) was our moderator on the M&A panel.

The best deals for data center sellers are in the secondary markets, says Skybox Datacenters managing partner Rob Morris. The yields are going to be fatter than the primary markets. Buyers are looking at the size of the economy in those secondary markets and looking at whether the data center was one of the first in that market. Rashad adds that some of the hottest markets for M&A activity are Columbus, OH, Minneapolis and Portland.

DH Capital CEO Peter Hopper says the market is also seeing a tremendous amount of consolidation. His investment banking advisory firm has been involved in several large deals recently, including Digital Realty Trust’s pending acquisition of Telx, a deal valued at $1.9B. Peter says most deals are strategic buyers looking for different types of properties.

Bytegrid CRO Drew Fassett argues that the M&A market is “frothy.” Providers are, however, looking for value-add transactions because it’s such a challenge to build certain services and much easier to integrate them through a strategic acquisition. Providers are looking at second-tier cities like Cleveland where there’s pent-up demand for data center services without the capacity. Bytegrid, a data center provider, recently opened a 300k SF facility in Cleveland.