First, higher interest rates raise the cost of funding deals, though this is not limited to only data centers. Several factors could limit this trend, however. 2 “Private equity is driving a boom in data center M&A deals,” Synergy Research Group, June 22, 2022. Their share increased to 65 percent from 2019 to 2021 and to more than 90 percent in the first half of 2022. ![]() From 2015 to 2018, private equity buyers accounted for 42 percent of the deal value. In the first half of 2022, there were 87 deals, with an aggregate value of $24 billion. In 2021, there were 209 data center deals, with an aggregate value of more than $48 billion, up some 40 percent from 2020, when the deals were worth $34 billion. According to NAREIT, as of October 31, 2022, the dividend yield stands at 3.14 percent, and the 2021 total return at 25.47 percent. 1 Relatively few data center operators remain publicly owned. Data centers have attracted the interest of investors, often because of the steady, utility-like cash flows and risk-adjusted yields. The latter lease out the space and typically provide network capacity and power, as well as the cooling equipment that keeps down server temperatures. ![]() This article is a collaborative effort by Srini Bangalore, Arjita Bhan, Andrea Del Miglio, Pankaj Sachdeva, Vijay Sarma, Raman Sharma, and Bhargs Srivathsan, representing views from McKinsey’s Technology, Media & Telecommunications Practice.ĭata centers are typically owned and operated either by big companies (such as cloud vendors, banks, or telcos) for their own purposes or by co-location companies.
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