In the high-stakes world of digital infrastructure, the data center M&A market is hotter than ever, with colossal deals reshaping the landscape. To navigate this complex environment, we turn to a leading expert in digital infrastructure finance. With years of experience structuring and analyzing multi-billion dollar transactions, she brings a sharp, insider’s perspective on the forces driving valuations, the critical role of power, and the future of specialized AI cloud providers in an increasingly competitive market. Her insights cut through the noise, revealing how private equity is rewriting the rules of the game and what it takes for operators to thrive.
With M&A activity reaching over $69 billion in 2025, what specific factors are fueling such high valuations? Could you share an example of how a company’s customer profile—hyperscale versus enterprise—directly impacts its acquisition price in today’s market?
It’s a perfect storm of relentless demand and a scarcity of high-quality, available assets. Investors see digital infrastructure as an incredibly stable, long-term play, and they’re willing to pay a premium for it. When you see a landmark deal like the $40 billion acquisition of Aligned Data Centers, it sends a powerful signal. The real driver behind the valuation, however, often comes down to the tenant mix. If you have an operator primarily serving hyperscale customers, you’re looking at a much more attractive asset. These facilities are built for massive scale and operational efficiency, which translates directly to higher margins. The hyperscalers often operate the sites themselves, creating a predictable, low-touch revenue stream. In contrast, a portfolio heavy with enterprise clients, while potentially commanding higher rates per kilowatt, involves significant customization, higher build costs, and more hands-on operational expenses, which can temper the final price.
Power availability is increasingly critical for valuations. Beyond just securing a site with committed power, what specific risk mitigation strategies are buyers using during due diligence to ensure future expansion is viable? Please walk us through the steps an operator takes to de-risk this.
This is the billion-dollar question right now. Power isn’t just a line item anymore; it’s the central pillar of any deal’s viability. Simply having power committed to a site is table stakes. The real due diligence, the deep-level de-risking, goes much further. We’re seeing buyers scrutinize the entire power lifecycle. This means they’re not just looking at today’s contract but are digging into the utility’s long-term generation and transmission plans. Can the grid support a doubling or tripling of capacity in five years? They’re modeling every potential point of failure. The sophisticated strategy is to acquire portfolios with established locations where the acquired operator has already done this homework. They’ve strategically evaluated each site, not just for what it is, but for what it can become. This proactive site selection is the most effective form of risk mitigation because the foundational work of ensuring a scalable power future is already baked into the asset before the acquisition even begins.
As advanced processor access improves, specialized neocloud providers face new pressures. What business models or niche strategies, such as vertically integrated energy, are most likely to ensure their survival? Please provide a metric you use to identify a resilient neocloud player.
The landscape for neoclouds is definitely shifting. Their initial advantage was built on the scarcity of advanced processors—a gap the hyperscalers couldn’t immediately fill. Now that the supply chain is loosening, that edge is eroding. For survival, they have to pivot from being hardware arbitrage players to true value-add service providers. I see two primary paths to resilience. The first is for the larger, more established players who can compete on scale and operational excellence. The second, and more interesting path, is extreme specialization. A provider that has, for instance, a vertically integrated energy source can offer a PUE and cost structure that a hyperscaler leasing space can’t match. A key metric I look for is what I call “stack dependency.” How much of their value proposition is tied to just offering GPU-as-a-Service versus how much is tied to proprietary software, developer-focused tools, or a unique infrastructure model? If their value is entirely at the hardware layer, they’re vulnerable. If they’ve built a defensible moat higher up the stack, they have a fighting chance.
Private equity has become a dominant force, funding the vast majority of M&A deal value. How does this influx of private capital change the competitive landscape and operational priorities for data center operators? Could you share an anecdote illustrating this shift?
It has fundamentally changed everything. The sheer scale of capital needed for growth, especially with AI driving demand, is something public companies struggle to raise without diluting their balance sheets. Since the beginning of 2024, a staggering 84% of the $151 billion in M&A deal value was fueled by private equity. This isn’t just a trend; it’s a complete takeover. This influx of private money has supercharged the market, allowing private operators to pursue aggressive growth strategies that their public counterparts can’t. I remember talking to the CEO of a publicly-traded operator who was incredibly frustrated. He had a fantastic pipeline of projects but couldn’t get the funding approved quickly enough by his board. Meanwhile, his private, PE-backed competitor announced three new campus builds in a single quarter, funded through a joint venture. The operational priority shifts from steady, incremental quarterly earnings to massive, long-term capacity builds. It’s a land grab, and private equity is providing the war chest.
We’re seeing more companies in sectors like telecom and web hosting carving out their digital infrastructure assets. What are the primary motivations behind these strategic moves, and what common challenges do these new, specialized data center businesses face when first operating on their own?
The primary motivation is simple: value creation. A telecom or web hosting company is valued on a completely different set of multiples than a pure-play data center operator. By carving out their data center assets into a separate entity, they can unlock the higher valuation that the market assigns to this specialized, high-demand infrastructure. It’s a strategic move to realize the hidden value on their balance sheet. However, the transition isn’t always smooth. The biggest challenge for these new entities is shifting their operational mindset. They’re no longer a cost center within a larger corporation; they are now a standalone business that needs to compete for tenants. They often have to build a sales and marketing engine from scratch and learn to negotiate with multiple tenants, not just serve a single internal customer. Achieving economies of scale is another hurdle. As part of a telco, they had immense purchasing power; on their own, they have to renegotiate with suppliers and prove they can operate efficiently to attract the investment needed for growth.
What is your forecast for the data center M&A market?
My forecast is for continued, aggressive M&A activity, but with a growing bifurcation in the market. The gold rush for premium, power-rich assets that can support AI workloads will intensify, pushing valuations for these specific sites even higher. We’ll see more large-scale consolidation as major players, backed by immense private capital, look to build regional dominance. At the same time, smaller or power-constrained assets, particularly those focused on traditional enterprise, may see valuations stagnate or even decline. The market is becoming much more sophisticated. It’s no longer just about square footage; it’s about power density, scalability, and strategic location. The next 24 months will be defined by strategic acquisitions aimed at securing the power and land needed for the next decade of AI-driven growth.
