Data centre M&A in 2025

May 2025  |  TALKINGPOINT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2025 Issue

FW discusses data centre M&A with Chelsea Pullen, Joshua B. Forman, Shawn K. Ronda at Greenberg Traurig, Martin Lerda at Tecto Data Centers, and Michael Borchetta at Harrison Street.

FW: What factors are driving the dramatic rise in demand for digital infrastructure?

Pullen: The rise in demand for digital infrastructure is being driven by a combination of technological innovation, evolving business needs, the explosion of data and the broader global shift toward digitalisation. For example, digital transformation across several industries has contributed to the rapid acceleration of the need for scalable and reliable digital infrastructure, with the adoption of cloud computing, digital payment technology, automation and artificial intelligence (AI) integration into business, and remote work and collaboration tools. The global rollout of 5G networks and internet of things (IoT) has increased the demand for edge computing resources to bring that data processing closer to the users for low-latency services like autonomous vehicles and real-time analytics. Advancements in quantum computing, AI infrastructure and cooling technologies are also reshaping data centre capabilities and market dynamics.

Forman: While tech infrastructure is planned in 10-year cycles, no one could have foreseen the super-events that accelerated demand in the data centre market. Arguably, the first accelerator was the advent of cloud computing – companies shifting their operations to the cloud, requiring scalable and reliable digital infrastructure. The explosive increase in data being generated by businesses, consumers and devices with IoT also contributed to the rise in demand for digital infrastructure due to the massive volume of data being managed and analysed in real-time. We then saw rapid growth during the pandemic with the increased use of virtual meetings and other technologies to facilitate working from home. While still adjusting to this increased demand and migrating to the cloud – which had already created a strain on the availability of power in the primary markets – the sudden and rapid expansion of AI applications created unprecedented demand for data centre capacity and energy resources. Data centres have certainly become the focal point in recent years. Previously, the agenda at an industry conference would be two full days of fibre, tower and satellite, with data centres getting a half day worth of press. Go to a digital infrastructure conference today, and it is all about the data centre.

FW: Could you provide an overview of M&A activity across the data centre industry in recent years? What types of acquirers does this segment typically attract?

Ronda: The exponential growth in the demand for digital infrastructure supporting AI and cloud computing has primarily driven the massive amount of M&A activity across the global data centre industry in the past few years. Billions of dollars continue to flow into the acquisition and development of data centres, and the owners, developers and operators thereof. This flow of capital has consistently targeted large scale developments tailored for the largest cloud providers and hyperscalers. Private equity firms have played the biggest role in driving M&A activity in this industry throughout key markets across North America, Europe and Southeast Asia. Public companies and real estate investment trusts (REITs) have also played a critical role in driving M&A activity in this industry.

Pullen: The digital infrastructure industry attracts a diverse range of investors. PE firms and venture capitalists often target high-growth opportunities, while pension funds and sovereign wealth funds seek stable, long-term returns. Institutional investors, such as infrastructure funds and REITs, also play a significant role, focusing on reliable, income-generating assets. Hedge funds and corporate investors may pursue more opportunistic or strategic investments, depending on market conditions. With the growing demand for digital infrastructure, the sector appeals to various types of investors with different risk profiles and investment goals, offering both high growth potential and long-term stability.

FW: How are financial buyers viewing and approaching digital infrastructure investments in the current market?

Lerda: Institutional appetite for digital infrastructure remains strong, driven by secular sector tailwinds and its proven status as a mission-critical asset class. Investors hold a high-conviction thesis, particularly regarding data centres, based on the ever-growing demand for computing power and the constraints in supply. Buyers approach investments in digital infrastructure with a long-term perspective, seeking opportunities that offer a combination of experienced management, strong fundamentals, including portfolio, blue-chip clients, land and power, and attractive risk-adjusted returns. Despite some recent news-related headwinds, there has been no significant slowdown in the sector regarding capital availability and investor appetite.

FW: With large data centre operators increasingly requiring a global footprint to remain competitive, do you believe M&A is the most efficient way to meet that objective?

Lerda: Over the past five years, M&A has played a meaningful role in enabling data centre operators to scale quickly, particularly in high-growth regions. It has provided a quick and often efficient way to acquire existing capacity, established customer bases and operational expertise. However, as the market matures and the geographic focus shifts toward secondary and emerging markets, the landscape is changing. Opportunities for large-scale acquisitions may become more limited, both in terms of size and expansion potential, driving operators to pursue more organic growth opportunities. Joint ventures have also gained traction recently as a strategic alternative for entering new markets. By partnering with financial investors or local players, operators can share the substantial costs of development and operation, access local market knowledge and navigate regulatory complexities.

FW: Could you provide insight on valuation multiples in the digital infrastructure sector? How do they compare to other sectors?

Borchetta: Valuation multiples in the digital infrastructure sector, especially for high quality platforms, continue to trade at a material premium to other comparable sectors – such as utilities – due to the high future growth potential, which is anchored by stable and recurring revenue streams today. Earnings before interest, taxes, depreciation and amortisation multiples for high-quality companies may trade in the 15 to 18 times-plus range, while high quality platforms could trade well into the 20s. The premium in digital infrastructure comes from its ‘picks and shovels’ role in the digital economy – everyone needs data bandwidth and data storage, and supply continues to struggle to keep up with insatiable demand. Moreover, we are still in the early stages of seeing the impact of trends like AI actually appearing as use cases throughout the digital ecosystem. While AI training has been the talk of the market with announcements such as DeepSeek, AI inference will ultimately require a higher quantity of deployments.

FW: How important is it for data centre investors to understand the legal and regulatory landscape and monitor what is on the horizon in terms of change? What key issues are having an impact on this space?

Forman: You cannot underwrite a deal in this space without understanding the legal and regulatory landscape, both specific to the site location and at a national level. Data centres are considered critical infrastructure in many contexts due to their essential role in supporting vital services and systems. Investors cannot just take a holistic approach; they need to scrutinise the potential end user, understand what data will be housed, and who is going to interconnect. With supply chain issues and restrictions on the type of equipment which can be used, investors need to consider the regulatory landscape before deploying capital at a site. We are still at the early stages here and I think investors need to keep a close eye on how governmental agencies move. While not directly under the jurisdiction of the Federal Communications Commission (FCC), investors need to understand whether the data centre is involved in telecommunications or internet services, such as hosting servers for internet service providers or managing critical communication infrastructure, as this may put them under the jurisdiction of the FCC. The use of cloud-hosted IT infrastructure has expanded significantly in recent years, prompting the US government to address new risks and threats to national security posed through use of US infrastructure as a service (IaaS) and AI. Investors in US providers of IaaS, including resellers, should continue to monitor. There have been rules proposed which would implement reporting requirements on certain operators to verify their customers and undertake monitoring and reporting obligations to protect against foreign cyber actors.

Ronda: Understanding the legal and regulatory landscape is critically important for data centre investors. The data centre industry is multidisciplinary and complex, operating within a complicated framework of laws and regulations related to data privacy and cyber security, energy consumption and transmission, environmental impact and sustainability, land use and zoning, employment and taxation. Investors must engage and align with knowledgeable attorneys and advisers in an industry where speed to market is paramount. Regulatory changes can significantly impact development and operating costs, operational strategies and even the viability of investments. Myriad legal and regulatory issues have significantly affected the data centre industry in recent years, resulting in variable returns on investments. Compliance with existing regulations, as well as proactive planning for upcoming changes, can protect investments and enable growth in this dynamic and evolving sector. Governments worldwide are expected to introduce stricter privacy laws, as well as environmental laws impacting data centre energy usage, carbon emissions and water consumption. As AI and IoT adoption grows, data centres will likely face new regulatory scrutiny related to the ethical use of data and the infrastructure supporting these technologies. Geopolitical developments, such as trade restrictions or cross-border data flow regulations, could very well impact the strategic location of data centres. In short, regulatory awareness and adaptability with respect to issues around data privacy, sustainability, energy efficiency and cyber security will continue to be critical to long-term success.

FW: What are your predictions for data centre M&A over the months ahead? What deal drivers and regional hotspots do you expect to shape this space?

Borchetta: 2024 was a banner year for data centre M&A with well over $70bn in activity reported. We expect a similar pace of dealmaking in 2025, with the activity of major platforms determining whether or not the market ultimately achieves a comparable volume of deal flow compared to last year. There are a few major trends that we are watching. First, most high-quality platforms already have their strategic capital partners in the sector. We believe the most attractive investment opportunities for established industry participants are reinvestments into these existing platforms. Second, we expect high quality private platforms will ultimately outgrow the capital capacity of their existing investor base, which will necessitate M&A activity such as initial public offerings. Lastly, primary data centre markets will continue to be constrained primarily by power, which will keep supply and demand in favour of landlords and developers with capacity, while continuing to fuel the growth of primary ‘adjacent’ – that is, the path of growth submarkets in the same primary region that can still meet availability zones requirements – as well as secondary markets.

Chelsea Pullen is a shareholder in Greenberg Traurig’s Northern Virginia office. She is an experienced digital infrastructure and commercial technology lawyer who assists many of the world’s largest data centre operators and developers, private equity firms, infrastructure funds and real estate investors across a broad range of transactions, including data centre leases, master services agreements and service level agreements. She can be contacted on +1 (703) 903 7533 or by email: pullenc@gtlaw.com.

Joshua B. Forman is a shareholder in Greenberg Traurig’s Miami office. His corporate practice includes commercial, tax, regulatory and bankruptcy matters, specifically focusing on data centre expansion, operations and transit services, including the purchase and sale of terrestrial and subsea fibre access and interconnection in the US, Canada, the Caribbean and Latin America. He can be contacted on +1 (305) 579 0500 or by email: josh.forman@gtlaw.com.

Shawn K. Ronda focuses his practice on commercial real estate transactions and digital infrastructure transactions. He guides clients through virtually all aspects of real estate acquisitions and dispositions, as well as finance, leasing and real estate development, with an emphasis on real estate development for data centre, student housing, mixed-use and retail projects in the Chicago area, throughout the US and abroad. He can be contacted on +1 (312) 476 5137 or by email: rondas@gtlaw.com.

Martin Lerda leads data centre strategy at Tecto, defining the firm's strategic direction for portfolio expansion. His responsibilities include identifying, analysing and executing investment opportunities aligned with Tecto’s strategic goals, leveraging experience in M&A, corporate finance and valuation. Previously, Mr Lerda held roles in investment banking covering the digital infrastructure sector, and investment roles at multi-strategy funds. He can be contacted on +1 (561) 314 0500 or by email: martin.lerda@tecto.com.

Michael Borchetta joined Harrison Street in 2013 and is a managing director in the transactions group. He is responsible for the sourcing, analysing and closing of transactions and venture relationships, with a focus on digital real estate and infrastructure as well as healthcare assets. During his tenure at Harrison Street, he has acquired or developed over $14bn of data centre and digital infrastructure, medical office, senior housing and life science assets on behalf of the firm’s discretionary funds.

© Financier Worldwide

THE PANELLISTS

Chelsea Pullen

Joshua Forman

Shawn K. Ronda

Greenberg Traurig

Martin Lerda

Tecto Data Centers

Michael Borchetta

Harrison Street