Perspectives on the Electrical Power Solutions Market (Baird)

Summary

• Baird's electrical power solutions M&A transactions since 2021 total ~$19 billion across 28+ transactions, with ~40% strategic buyer outcomes and ~14x average EV/EBITDA.p.4
• Data center electricity demand is projected to more than double, reaching approximately 945 TWh by 2030.p.8
• Utilities are expected to spend ~$195B in 2025E, an increase of ~$75B from 2019.p.8
• Multiple premiums versus the industrial market are 3.0x for electrical / grid products, 0.8x for services, 3.7x for data center products and 24.5x for nuclear products / services.p.13
• Global M&A values became the third-highest quarterly total in four years, increasing 23% year-over-year.p.18

Key insights

1. Data center electricity usage is shown growing at a 25%+ CAGR.p.9
2. Analysts see hyperscaler capex potentially reaching the multi-trillions over the next 5-10 years.p.6
3. Cooling systems are becoming a major contributor to data center energy consumption.p.8
4. Major tech firms are turning to nuclear power, announcing plans to deploy SMRs to meet AI-driven data center energy demand.p.8
5. Data center and related services peers have rebounded sharply on accelerating AI infrastructure demand.p.13
6. Power availability has become the single most critical bottleneck for AI-driven data center capacity, driving M&A for control of the power delivery stack.p.18
7. Valuations for high-quality platforms continue to command a material premium.p.18