Interest in company highlights trend of hyperscalers leasing data center capacity to keep up with cloud demand
Data center developer CyrusOne reportedly is working with an advisor as the Dallas-based real estate firm considers its options after being approached by an investor group interested in acquiring the company.
The Lowdown: Citing sources familiar with the matter, Bloomberg reported that a group including KKR and Co., Stonepeak Infrastructure Partners, and I Squared Capital is in the early stages of determining whether to make a bid for CyrusOne. The company has made its name among a growing number of companies that offer data center capacity to hyperscale cloud providers.
The Details: Bloomberg noted that the reported interest in CyrusOne by the bidding group is still in its initial phase and that officials with the data center company haven’t made any decisions and could opt to remain independent. Still, the interest in CyrusOne shows an increasing interest in companies that offer data center capabilities to firms that don’t want to run their own facilities or need to quickly expand their data center capabilities but don’t have the time or resources to build their own.
Analysts with Synergy Research Group reported this month that in the first half of 2019, there were 52 data center-oriented M&A deals that closed with an aggregate value of more than $65 billion. That’s 18% higher than the first half of last year and more than the total for all of 2016.
The Impact: The reports of interest by an investor group in buying CyrusOne, particularly in the wake of the Synergy Research numbers, should give companies that provide data center space and services optimism in the direction of the industry, particularly with the rapid expansion of cloud operations. Hyperscale cloud providers are increasingly leasing data center space and capacity from companies like CyrusOne rather than spending the money and time to build out their own, a trend that likely will only grow.
Background: CyrusOne runs more than 45 data centers throughout North and South America, Europe, and Asia, with hundreds of customers worldwide, including more than 190 of the Fortune 1000 companies. It’s the third-largest data center provider in the United States. The company was founded in 2000, offering colocation services to energy companies. After twice being acquired, it was spun out of Cincinnati Bell in an IPO in 2013.
Apparently, CyrusOne has made quite a few purchases of its own. In its report this month, Synergy Research listed the company as one of several “serial acquirers,” along with Iron Mountain and NTT.
The Buzz: “Analysis of data center M&A activity helps to affirm some clear trends in the industry, not least of which is that enterprises increasingly do not want to own or operate their own data centers,” said John Dinsdale, a chief analyst at Synergy Research. “As enterprises either shift workloads to cloud providers or use colocation facilities to house their IT infrastructure, more and more data centers are being put up for sale. This, in turn, is driving change in the colocation market, with industry giants on a never-ending quest to grow their global footprint and a constant ebb and flow of ownership among small local players.”