While increasing digitization has been gathering pace over the past decade, the COVID-19 pandemic vastly accelerated this trend. Internet usage has soared as populations increasingly carry out daily tasks online, and as working from home becomes commonplace.
Not surprisingly, digital infrastructure assets such as towers, data centers and fiber networks have become increasingly attractive to investors.
This trend was a major driver of European infrastructure dealmaking in the first five months of 2021. Deal value for infrastructure deals in all sectors increased 77% year on year to reach US$37 billion, according to Inframation, an Acuris publication. The total number of deals rose by 12% over the same period to 57 transactions.
Telco infrastructure attracts attention
Total value for infrastructure deals in the telecommunications sector alone came to US$16.9 billion over the first five months of the year—a 26% rise on the same period the previous year.
The largest of these deals, and of the year so far, was Spanish telecoms infrastructure provider Cellnex’s acquisition of French telecom towers operator Hivory—a joint venture set up by Altice and KKR. Through the purchase, valued at US$6.3 billion, Cellnex will take over Hivory’s 10,500 towers across France. On top of this, it will invest a further €900 million to build 2,500 new sites by 2029.
Cellnex was responsible for another of the largest infrastructure deals of the year so far, the US$1.9 billion acquisition of Cyfrowy Polsat's mobile tower business, Polkomtel Infrastruktura, agreed to in February. The Polish firm operates 7,000 mobile telecom towers across the country, as well as 11,300km of backhaul fiber cables, a national network of microwave radio links and active infrastructure equipment including 37,000 radio carriers. Cellnex has committed to invest an additional €600 million to build up to 1,500 new tower sites by 2030.
The importance of fiber networks was highlighted in the second-largest telecoms infrastructure deal of the year so far, which saw Morgan Stanley Infrastructure Partners (MSIP) acquire a 92% stake in Germany-based broadband provider Tele Columbus for US$2.2 billion. Tele Columbus plans to upgrade two million of its customers to fiber-optic networks by 2030.
Transportation adapts to new normal
The transportation sector has been hit hard by the COVID-19 pandemic, as people stayed home and industry and the flow of goods slowed. As economies around Europe and the world begin to transition to a post-COVID model, some transportation groups are making deals to better prepare their businesses for the likely future.
French state-owned railway firm SNCF announced the long-discussed disposal of a majority stake in freight group Ermewa for US$3.9 billion to a consortium led by Canadian pension fund Caisse de Dépôt et Placement du Québec (CDPQ). The deal comes after SNCF announced a loss of US$3 billion in 2020 due to the pandemic and labor disputes.
In February, EQT Infrastructure V and co-investor Norwegian sovereign investment company Nysnø Climate Investments acquired private transportation company Torghatte for US$986.9 million, part of a long-term strategy that features incorporating future-proof climate technologies for green transportation, such as green fleet renewal. The company has stated that investment in new technologies is critical to help Norway reach its goal of halving carbon emissions by 2030.
Refocusing on social infrastructure
The COVID-19 pandemic has highlighted the importance of social infrastructure. From locked-down eldercare homes to overwhelmed hospitals to empty school buildings, the vital role these institutions play in a functioning society was impossible to ignore.
While social infrastructure deal value in the first five months of 2020 came to only US$39 million, the same period in 2021 registered a nearly tenfold increase, with US$3.8 billion worth of deals. Among the largest was the US$1.5 billion take private bid by West Street Global Infrastructure Partners for Adapteo, a Finnish provider of modular buildings.
The takeover offer came months after Swiss PE firm Partners Group’s US$1.2 billion acquisition of Parmaco, another provider of prefabricated modular buildings. Parmaco and Adapteo provide environmentally sustainable structures for use as schools, daycares and care homes. Such buildings allow local municipalities to respond quickly to changes in demographics and educational needs.
And in March, France-based childcare provider Babilou acquired Netherlands-based Blos for US$272.7 million. Babilou was acquired in August by Antin Infrastructure Partners for US$916.15 million.
Outlook
From subsea networks to hydrogen-fueled transport, the European infrastructure industry continues to grow in scope, offering both trade buyers and investors exciting opportunities for growth. The slow return to in-person schooling and work, along with the ongoing drive to digitize society and the energy transition, all require significant investment in infrastructure.
As the year progresses, this growing demand will continue to generate landmark deals within the European infrastructure sector.