For Dealmaking Firms, Data Centers Are Money Centers. Will It Continue?

Kim McGrath and Melissa Kalka discussed how Kirkland's global interdisciplinary data center practice is meeting the market’s growing demand as part of The American Lawyer’s 2026 “Dealmakers of the Year” issue.

The ongoing data center boom was unmatched in 2025 in its ability to keep Big Law transactional teams busy—along with attorneys in adjacent practices like real estate, funds, energy, regulatory and litigation. But many involved are wondering if they are at the crest of a wave that’s been building for four years, and if a plunge is inevitable.

Data center M&A volume hit a record $69 billion in the past year, according to reported figures from S&P Global, as investors look to build out the infrastructure to support the rapid deployment of AI across the global economy. Practitioners are thrilled to take advantage of the work now, while recognizing that it is bound to transform—via new financing mechanisms, greater risk, and potentially a wave of M&A—in the coming months and years.

Daniel Farris, a partner at Foley & Lardner in Chicago, is one of a number of attorneys who observed that data center development has exploded since 2022, but he expects more stable growth over the long-term.

“When folks say they expect it to slow down, it’s slowing down from a pace that’s frenetic. That doesn’t mean there won’t be continued growth. I think there will be continued growth. There will be some winners and losers [and] consolidations,” he said.

A survey Foley conducted last fall supports Farris’ forecast. The firm surveyed financiers, developers, providers, operators and tenants of data centers, and the results made public in January showed that 63% of respondents anticipate a strategic correction in the data center market by 2030.

Nearly 40% indicated that the current pace of data center development is unsustainable, although 95% believe the industry will meet the growing “compute demand” by the end of the decade.

While data center work involves lawyers across a range of industries, Farris said “power is king right now” and it acts as the driving source for many of the projects. Some companies have invested in powered land, while others are investing in their own power projects, he said.
Gabe Silva, partner in Simpson, Thacher & Bartlett’s energy and infrastructure group, echoed the sentiment that power is king.

“Demand for data centers has always been driven by new technology,” Silva said. “Before, it was cloud computing. Two years ago, a 100-megawatt datacenter was massive. Now, we are talking about 5-gigawatt datacenters to power AI engines.” (For context, a 1-gigawatt power facility could power about 750,000 U.S. homes).

The industry is facing some important challenges, including power availability and sustainability, but also it is starting to see some push back in the form of public opposition.

Sam Rudnik, partner in Simpson’s private equity group who focusses on real estate and digital infrastructure work, said that “community buy-in is becoming front and center,” and that he has seen projects where “people pulled out because of that.”

But part of the job of the attorneys working on those projects is to deal with those issues, Farris said. "From a law firm standpoint, having both the experience in the industry and the diverse teams that can be nimble and flexibility is really important."

Signaling Expertise

A number of firms are looking to demonstrate their capabilities in the sector by formalizing data center teams.

Morgan Lewis & Bockius, for example, launched its Data Center Strategic Initiative about 18 months ago, enlisting lawyers in real estate, power, telecom, finance and technology transactions, insurance, international trade, cybersecurity, intellectual property, privacy, M&A and private equity.

“The number of practice areas that these types of deals hit are really phenomenal,” co-leader Barbara Melby said.
Melby is seeing “incredible activity” in data center work and expects growth in demand. “We are not at the top of this market,” she said. “It’s frenzy.”

While many new data centers are under construction or in the planning stages, Melby said they are seeing a considerable amount of repurposing as well.

Melby’s colleague Andrew Ray, an M&A partner in Washington, D.C., said examples of repurposing include transforming a crypto mining operation in Texas for AI, and George Washington University’s recent announcement of the sale of its Virginia Science and Technology Campus to Amazon Data Services, which plans to use it as a data center, for $427 million.

Ray said data center work today is like the gold rush in the 19th Century. But it differs in that the advancement in technology that AI represents is not going away.

“One thing to underscore: In some ways, the real estate is the easiest element, or the more traditional element, of a data center...The complicated elements are what’s inside or beside the data centers,” he said.

Data center work is “not just a U.S play,“ Melby said, identifying global and regional tiers. Because of that, the firm has hired technology lawyers to build out the team, including in Paris, Chicago and Southern California.
“We are being opportunistic,” she said.

Michael Rechtin, a Latham & Watkins partner in Chicago, who advises clients on data center and infrastructure transactions, expects demand for data center work in 2026 will hit a record high.

“The next two or three years after this...will look like it is this year. After that, a maturation of the industry,” he said.

Market Evolution

Even as the need for size and power grows, expect a rise in creative funding structures, Kim McGrath, partner in Kirkland & Ellis’ real estate group who works on data centers, said.

“In 2026, you will see new types of financing to the market,” she said. “But even then, we have a debt issue. With the exception of public data center companies, all of the Blackstones, Brookfields, etc, will need debt and a lot of it, in numbers that no asset class has ever seen.”

McGrath’s colleague Melissa Kalka, an M&A and private equity partner in Dallas who works extensively on data center projects, said that the firm now has real estate lawyers—not a historic practice at the firm—working in combination with infrastructure lawyers on data centers, and launched a customer contracting practice to handle the revenue contracts that are the “guts” of the data center.

Kirkland has also focused on adding enforcement lawyers for navigating the permitting process and dealing with energy regulators, she said, noting that the firm started growing its data center team four years ago.

Over the last 12 months, Kirkland has handled more than $164 billion in data center M&A and $67 billion in data center financings.

Justin Stolte, global chair of the Latham & Watkins’ energy and infrastructure group, expects data center demand to remain strong this year and beyond, but he's uncertain whether M&A in the sector will remain at the current “state of play, which is as big as it’s ever been” and is wondering whether the nature of deals will change.

“Over the last six months, there’s really been a move to buying power at scale,” Stolte said, adding that it may not continue forever at that pace. Once some of the data centers are past their development stage, “you will see scale-downs.”

Project risk will likely increase, he said, thanks to regulatory attention and local pushback.

“You will probably see some projects that will experience some risk of not meeting timelines...that might lead to more M&A as well. I wouldn’t call that distressed M&A, but maybe stressed M&A,” he said.

Like other firms that have built teams of lawyers working on data center projects, Latham has hired to fill out its team, including Rechtin, a former DLA Piper partner who arrived in 2025 as a real estate partner and a member of the firm’s Data Center Team.
“Mike hit the ground running,” Stolte said, as a member of the group of about 100 lawyers at Latham in several practices and geographies focused on data centers.

“It’s one of the top two or three areas of highest growth for Latham,” he said.

Stolte, who splits time between Houston and New York, situated the current burst of data center activity in Texas as the latest peak in a period of ups and downs that began with the unconventional gas boom in 2010, followed by a wave of significant bankruptcies in 2014 and 2015, then a transition towards renewables.

“That’s why people are excited,” he said.

And lawyers at firms that have been at the vanguard of this work say that they remain committed to the opportunities it presents.

“This is not something we are doing because of a boom,” said Silva at Simpson Thacher. “We are doing it because we have been doing this for so long that we will continue to hire laterals into the practice over several years. We believe we are ahead of other firms because we have the right people with the right expertise.”