‘Ever-Increasing Demand for Data Center Capacity’ Fueling PE Interest

In 2022, private equity firms are very, very interested in the data centers that power cloud computing. So far this year, private equity investors have provided 90% of the deal value in the data center sector.

That compares to 42% between 2015 and 2018, and a combined 65% between 2019 and 2021. Indeed, cloud computing continues to prove its merit — and private investors want their share of the bounty.

“There is an ever-increasing demand for data center capacity, driven by rapidly growing cloud markets, aggressive expansion of hyperscale operator networks and continued growth of data-rich digital services,” said John Dinsdale, a chief analyst at Synergy Research Group. “The trouble is that building and operating large fleets of data centers is highly capital intensive. Even the biggest data center operators have had to seek external funding to allow them to meet growth targets while protecting their balance sheets. As the level of resulting M&A activity has shot through the roof, virtually all of the incremental investment has come from private equity.”