Acquisitions significantly impacted the data center industry in 2016 and will continue to do so as competition increases and data center operators look to expand. M&A records from last year will likely be smashed in 2017 when the $3.6B Verizon data center sale and the $2.3B sale of CenturyLink data centers officially close.
Let's take a look back at how everything shook out in the data center marketplace at the end of 2016.
Here is a recap of the M&A activity:
Zayo expanded its cloud and colocation footprint via a $18.9M deal to acquire data center operator Clearview International. Clearview owned and operated two data centers in Texas with a combine total of about 30,000 square feet of space. That extra square footage will expand the Texas footprint of the company's zColo division to seven data centers in all.
Earlier in the year, Zayo acquired a data center in Santa Clara for $12.8M, originally built by Server Farm Realty in 2011. The facility is the company’s first in Northern California and in the Silicon Valley area, despite Zayo owning a dark fiber footprint of more than 1,500 route miles in the immediate vicinity. The data center is a 26,900 square foot building that offers three megawatts of critical power.
The folks at Lightower celebrated the 4th of July holiday in 2016 with the purchase of Datacenter101 in Columbus, Ohio. The facility will give Lightower ownership over a key connectivity point for its Ohio markets. With a downtown footprint of some 10,000 square feet, it's clearly just a colo foothold that will support the the company's core network services.
To help top off the final quarter of 2016, Equinix has agreed to purchase a portfolio of 29 data centers on 24 sites from none other than Verizon. The fact that Verizon had been looking to monetize its data center assets hadn’t been much of a secret, the rumors have ebbed and flowed several times. And Equinix has always been one of the likeliest buyers. The assets span 12 metro areas, including three new areas (Bogota, Culpeper, and Houston).
A substantial amount of European colo space changed hands under the watchful eye of the EU. Equinix divested itself of eight data centers that Digital Realty acquired for approximately $874M. In parallel, Equinix got a binding option to acquire Digital Realty's facility in St. Denis, Paris. Seven of the facilities moving from Equinix to Digital Realty are former TelecityGroup locations, including Bonnington House, Sovereign House, Meridian Gate and Oliver's Yard in London; Science Park and Amstel Business Park I in Amsterdam; and Lyonerstrasse data center in Frankfurt. The other is Equinix's West Drayton data center in London. In all, the transaction covers 213,000 net sellable square feet with 24.4MW of IT load, of which about 30% is available to lease.
CenturyLink followed up its purchase of Level 3 Communications with the decision to sell off their data centers and colo business to a private equity. CenturyLink entered into an agreement to sell the division to a consortium of funds advised by BC Parnters and led by Medina Capital Advisors and Longview Asset Management. They'll get $2.15B in cash and keep a minority stake worth $150M in the new company. They'll use those funds to help fund the cash portion of the Level 3 deal. A big piece of CenturyLink's colo business came from the Savvis acquisition back in the spring of 2011, and contains a portfolio of 57 data centers stretching across 2.6 million square feet of space fed by some 195MW. As for the hosting and cloud business that runs within those data centers? CenturyLink is going to be keeping those to continue to serve the enterprise and business markets.
TierPoint signed a definitive agreement to acquire Omaha-based Cosentry. Cosentry has 9 data centers across the Midwest: two in Omaha, two in St. Louis, two in Kansas city, two in Sioux Falls, and one in Milwaukee. Those are all new markets for Tierpoint, and will give them 38 data centers nationally spanning 24 markets in all. That number has been rising quickly, as last year TierPoint bought Windstream's data center business, CxP Data Centers, and AlteredScale, not to mention Xand in 2014.
QTS purchased one of New Jersey's larger data center facilities, the NJ-1 campus and customer base of DuPont Fabros Technology in Piscataway, adding some 38 acres and 360,000 square feet of raw space to its portfolio. DuPont Fabros had announced its intention to find a buyer for the facility back in January 2016. They had found it difficult to fill the facility as compared to their other markets, and believed that the location simply wasn't conducive to their wholesale approach. QTS has more of a direct approach to the enterprise market, and it seems like a better fit in their hands. The deal brought QTS's footprint in the state up to three locations, the other two being in Princeton and Jersey City -- both of which are at or near full capacity.
(Thank you to Telecom Ramblings for help with the list.)
As big corporations continue to eat up the little guys in the data center marketplace, we look forward to see where things stand January 2018.
Stay tuned for our next 2016 M&A recap post - Network Providers.
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