Consultancy Counts

Steve Wallage

Analysis From Steve Wallage, MD, BroadGroup Consulting
M&A hotting up in data centre space

Much talk at last week’s London Finance and Investment Forum, London ( was around M&A activity. Some deals are very much in the public domain, such as the divestment of assets from the TeleCity/Equinix deal, while others are yet to be made quite so public. Indeed, attendees at the event included a number of potential sellers, who have yet to start the process, or have quietly indicated they are open to offers, but at an often lofty valuation.

Within all this talk, the ‘elephant in the room’ is what will happen to Interxion.

The jilted bride from the TeleCity/Equinix deal remains a unique asset in terms of its size and spread of locations. Potential buyers of other assets know they would have to make a large number of country deals to replicate the Interxion estate.

Which brings us neatly to Digital Realty. This is a company that has seriously and fundamentally changed in the last 12 months, and continues to do so apace. It is not just the strategy and culture, but the new employees, many of whom have come from a co-location background. And behind all this is the acquisition of TelX, a transformative deal for Digital.

However, one ongoing concern has been its relative weakness in Europe and Asia. While TelX brings many attributes, its 21 data centres were all in the US. The benefits of a strong global footprint can be seen at Equinix, with nine of its top ten customers, located across Equinix data centres in three continents.

So what should Digital do? The view from a panel at the Finance and Investment Forum was that they were the natural buyers of the divestments from TeleCity/Equinix. Such assets do have appeal for Digital but a number of challenges including the number of competing bidders, focus on London which is also Digital’s strongest European market, variability of assets and long-term leases on many of the data centres.

Back to Interxion, whose stock price rose ~8% yesterday on hopes of a Digital bid. It has challenges for Digital, not least the timing with much work still to do around TelX.

However, Digital has been too timid before when faced with potential opportunities. If another buyer appears for Interxion, it is something it will long regret.

Steve Wallage, Managing Director
Broadgroup Consulting
T: + (44) 1372 869 688