Data Centre Due Diligence: The Acquisition Checklist

Acquisitions Fail on Diligence, Not Price

The data centre M&A market processed over $100 billion in transactions in 2024-2025. Most of these deals closed successfully. The ones that did not — or that resulted in post-close value destruction — almost universally failed at the due diligence stage. Missed environmental liabilities, undisclosed power constraints, or overestimated remaining useful life can erase hundreds of millions in projected returns.

This checklist covers the 25+ critical items that experienced data centre acquirers evaluate before committing capital.

1. Power Infrastructure

Power is the most critical and most frequently misrepresented element of a data centre transaction.

• -Utility interconnection agreement:: Obtain the actual utility contract. Confirm contracted capacity (MW), rate schedule, term, and renewal provisions. Verify whether the rate is a standard tariff or a negotiated economic development rate that may not transfer.
• -Transformer and switchgear capacity:: Confirm nameplate capacity of utility transformers, medium-voltage switchgear, and automatic transfer switches. Verify whether equipment is rated for the claimed IT load plus overhead.
• -Generator inventory:: Document make, model, age, hours of operation, and maintenance history for every generator. Generators with 10,000+ hours require near-term overhaul ($200-500K each). Confirm fuel storage capacity and delivery contracts.
• -UPS systems:: Confirm UPS topology (double conversion, rotary, flywheel), capacity, battery type (VRLA, lithium-ion), battery age, and replacement schedule. VRLA batteries older than 4 years present imminent replacement cost ($500K-1M per MW).
• -Power distribution:: Trace the full power path from utility entrance to rack. Identify single points of failure. Confirm redundancy level matches the claimed tier classification.
• -Capacity utilisation:: Determine the ratio of contracted/sold power to actual available capacity. A facility selling 20 MW with only 15 MW of actual infrastructure capacity is oversubscribed.
• -Power quality:: Review power quality monitoring data for the past 12 months. Voltage sags, harmonics, and frequency deviations indicate grid instability or undersized infrastructure.

2. Cooling Systems

• -Cooling capacity (tons/MW):: Industry standard is 250-350 tons of cooling per MW of IT load for air-cooled facilities. Verify installed tonnage against actual and projected load.
• -Equipment condition:: Document age, manufacturer, and maintenance records for all chillers, cooling towers, CRAHs, pumps, and piping. Chillers older than 15 years face declining efficiency and parts availability.
• -Refrigerant compliance:: Identify refrigerant types in all cooling equipment. R-22 (HCFC) is phased out under the Montreal Protocol; replacement requires equipment upgrades. R-410A and R-134a face future restrictions under the Kigali Amendment.
• -Water supply:: For facilities with evaporative cooling, confirm water supply contracts, cost per gallon, and drought risk. Arizona and Texas facilities face increasing water availability risk.
• -Liquid cooling readiness:: Assess whether the facility can support direct liquid cooling (DLC) for AI workloads. Required: reinforced floors (250+ lb/sq ft), piping infrastructure, and CDU space. Retrofitting costs $1-3M per MW.

3. Structural and Environmental

• -Roof condition:: Commission an independent roof survey. Data centre roofs support heavy mechanical equipment and must be rated accordingly. Replacement cost: $15-30/sq ft.
• -Floor loading capacity:: Raised floors must support current and projected rack weights. Standard raised floor: 150 lb/sq ft. High-density AI racks require 250+ lb/sq ft. Confirm structural slab capacity beneath raised floor.
• -Environmental Phase I/II:: A Phase I Environmental Site Assessment is the minimum. If the property has industrial history, a Phase II (soil and groundwater sampling) is essential. Remediation liabilities can exceed the property's value.
• -Flood risk:: Confirm FEMA flood zone designation. Obtain 500-year floodplain maps. Review historical flood records for the specific site and surrounding area. Check stormwater drainage capacity.
• -Seismic assessment:: In seismic zones, commission a Probable Maximum Loss (PML) study. PML above 20% typically requires seismic retrofitting ($2-5M per 10MW facility) or increased insurance reserves.
• -Asbestos, lead paint, PCBs:: Buildings constructed before 1980 may contain asbestos in insulation, floor tiles, or fireproofing. PCBs may be present in older transformers. Testing is mandatory; abatement costs range from $50K-500K+.

4. Commercial and Financial

• -Tenant roll analysis:: Map every lease by tenant, contracted power, term, expiration date, escalation rate, and renewal options. Identify concentration risk (single tenant >40% of revenue) and near-term expirations (within 24 months).
• -Revenue quality:: Distinguish between contracted revenue and revenue at risk. Metered power revenue fluctuates with utilisation. Cross-connect revenue depends on tenant interconnection activity.
• -Churn history:: Request 36 months of tenant move-in/move-out data. Annual churn above 8-10% suggests pricing, service, or market positioning issues.
• -Backlog and pipeline:: Evaluate signed-but-not-commenced leases and active prospect pipeline. Confirm prospects with direct outreach where possible.
• -Operating expense analysis:: Normalise 24-36 months of operating expenses. Identify one-time items, deferred maintenance, and below-market service contracts that will reset at market rates.

5. Legal and Compliance

• -Title and survey:: Confirm clear title, easements, rights-of-way, and any encumbrances. Utility easements that cross the property may restrict future expansion.
• -Zoning and permits:: Confirm the facility has all required permits (building, electrical, mechanical, fire, occupancy). Verify zoning allows data centre use by right, not by variance or special permit that may not transfer.
• -Environmental permits:: Air quality permits for generators, stormwater permits, and any hazardous materials storage permits. Confirm compliance with all conditions.
• -Insurance review:: Obtain copies of all insurance policies. Confirm property, business interruption, and liability coverage is adequate. Identify any exclusions relevant to data centre operations.
• -SOC 2 / ISO 27001 compliance:: If the facility holds certifications, review the most recent audit reports. Identify any noted exceptions or findings. Certifications that lapse post-acquisition create tenant notification and retention risk.

6. Network and Connectivity

• -Carrier inventory:: Document every network provider with presence in the facility. Confirm physical infrastructure (fibre, conduit, splice points) is owned or leased, and on what terms.
• -Meet-me room:: Assess capacity and condition of carrier meet-me rooms. Overcrowded or poorly managed MMRs limit new carrier additions.
• -Fibre routes:: Identify diverse fibre entry points. A facility with a single fibre entry is a single point of failure, regardless of how many carriers are present.
• -Cross-connect revenue and pricing:: Cross-connects at $200-500/month each represent high-margin revenue. Confirm pricing is competitive versus market. Excessive pricing drives tenants to alternative interconnection methods.

Using This Checklist

Download this checklist and adapt it to your specific transaction. For acquisitions exceeding $50M, we recommend engaging specialised data centre technical due diligence firms in addition to standard commercial real estate diligence.

Score any target facility using our Viability Score tool, compare it against market benchmarks, and contact our advisory team for transaction support.