Global private equity investors and asset managers are bracing for billions of dollars in mergers and acquisitions and data center investments in Asia Pacific as the artificial intelligence (AI) boom fuels demand for digital infrastructure.
Global private equity investors and asset managers are bracing for billions of dollars in mergers and acquisitions and data center investments in Asia Pacific as the artificial intelligence (AI) boom drives demand for digital infrastructure.
The rapid rate of transactions in the world’s most populous region comes as countries and businesses respond to rising demand for AI, necessitating increased data capacity, according to industry executives.
This year, Asia Pacific, including Japan, has dominated dealmaking activity in the global data center industry, with M&A value totaling $840.47 million, accounting for more than half of the total, according to LSEG statistics.
According to LSEG, data center deals in the region will reach a record high of $3.45 billion in 2023. That figure is expected to be topped this year by at least a couple of large transactions in the pipeline.
A number of financial sponsors, including global investment giant Blackstone Inc. (BX.N.) (opens a new tab), are interested in acquiring AirTrunk, which owns 11 hyperscale data centers throughout Australia and the rest of the region, according to people familiar with the transaction.
According to insiders, AirTrunk’s owners, Macquarie Group (MQG.AX) and Canada’s Public Sector Pension Investment Board (PSP), want to value the company at up to A$15 billion ($9.8 billion) in what might be Asia’s largest data center transaction this year.
“The AI revolution is creating an unprecedented wall of demand for high-quality data center capacity,” said Garren Cronin, managing director of Cadence Advisory, which advised on Australian data center operator NEXTDC’s $861 million financing.
“The new capacity that needs to be constructed in Asia Pacific over the next three to five years is simply staggering. My anticipation is that deal activity in the data center market will increase in 2024.”
Microsoft Corp. (MSFT.O), which opened a new tab, announced last week that it will invest $2.2 billion in Malaysia over the next four years to extend its cloud and AI services throughout Asia.
The rise of data center investments in Asia follows a similar trajectory to that seen in the United States and Europe, with technology behemoths such as Amazon (AMZN.O.), Microsoft, Alphabet Inc. (GOOGL.O.), and Meta Platforms (META.O.) rapidly expanding their AI capabilities.
Other prospective acquisitions in Asia include Indonesia’s state-owned Telkom Indonesia (TLKM.JK) selling a share in its data center business for $1 billion and Japan’s NEC considering a $500 million data center sale, according to press sources.
Ahmad Reza, Telkom’s Senior Vice President of Investor Relations, said on Wednesday that the company is open to strategic collaborations to expand NeutraDC’s data center capabilities and markets.
“We have explored several potential partners, but we are still evaluating the best one,” he stated. “We expect to finish this process by the end of this year.”
NEC stated that it was unable to comment on market speculation.
Bain Capital, a US investment firm, is looking for credit financing for Chindata’s foreign assets as well as investments in its China business, according to people familiar with the matter.
Bain, which took Chindata private from the Hong Kong stock exchange last year for $3.16 billion, declined to comment.
Goldman Sachs Asset Management (GSAM), which invested in AirTrunk in 2017 before selling its investment to a Macquarie-led consortium three years later, has spent more than $1 billion on data center development in Asia in the last three years.
Nikhil Reddy, GSAM’s head of APAC real estate, stated that the firm would actively engage in further projects, with a special focus on Japan and South Korea.
“AI creates a new form of demand for data centers that goes beyond the cloud’s traditional low-latency requirements. Now, with AI, which requires tremendous data consumption, bandwidth is critical,” he said.
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