Data centres present M&A opportunity to UK market

Data centres could be set to power investment across Europe – and particularly in the UK. A new paper from Eight Advisory has examined how the assets are already stimulating the market.

For the past two years, AI hype has come with a caveat: to unlock the potential of the technology, more capacity will have to be opened up to power AI solutions. The UK Government has bought into this wholesale, and has recently re-confirmed its commitment to give new data centres priority – pushing back regulatory measures to enable data centre projects to build on green belt land via a fast-tracked scheme that would prevent local councils from blocking new sites.

Now, a new study from Eight Advisory suggests that this could help to unlock new value in the UK’s M&A market continue its journey back to growth. Looking at Europe’s investment hotspots, the researchers found that the continent remains “undersupplied” in terms of the data centres believed to be necessary to realise the “potential” of AI technology.

At present, demand is outpacing infrastructure development, creating attractive opportunities for investors. In 2024, the world saw record-breaking data centre transactions, with more than 21 deals exceeding $2 billion and private equity firms leading 85-90% of deals since 2022. Total value approached $140 billion, while 178 deals took place in total.

Europe was no exception to this, witnessing several significant transactions in the sector in 2024. European data centre deals have grown at a 46.0% CAGR since 2019, according to Eight Advisory, with Germany representing the most active market with 19 transactions last year. At the same time, while activity in Europe remained focused on key markets, a number of secondary markets rose to prominence, such as the Nordics, and leading cities such as like Madrid and Milan.

The UK remained one of the leading markets in the continent, with 13 deals in total. However, having been level with Germany on 11 in 2023, it was some distance behind the 19 deals that occurred there in 2024 – while ‘other’ alternative markets also saw 14 deals outpace the UK – and there may be fear that the country is squandering its early leadership position; something which the country’s changing data centres policy is seeking to avoid.

This could help build on the reputation of London, which serves as a key interconnection point between Europe and North America – though it currently faces constraints such as rising costs and energy limitations, which secondary markets in Southern Europe, such as Madrid and Milan, and the Nordics may benefit from. Thanks to their land and energy availability​, and lower workload latency requirements, they will have significant pulls on investment, unless the UK is able to adapt.

European Telecoms and Digital Infrastructure lead at Eight Advisory Adam Bradley commented, “Our research and experience shows that high-growth data centre asset classes, such as co-location and edge, present strong investment opportunities in both established FLAP-D markets and emerging secondary hubs. However, challenges like rising costs and energy availability require attention. This white paper offers UK investors valuable insights into key growth markets and opportunities, along with an overview of profitability drivers to capitalise on the sector’s strong fundamentals."

There are still questions over the sustainability of the market, however. While previously betting on the value of data centres to work as the basis of Neo-Keynesian market stimulation, pouring resources into enabling infrastructure that can attract this projected investment does not seem so sure-fire since the release of DeepSeek. While so much of the discourse around the ‘AI revolution’ previously suggested more, larger data centres would be needed to power it, the advent of the less resource-hungry, cheaper AI model possibly undermines the basis of that entire plan.