텍사스 주지사 그렉 애벗의 데이터센터 동결 조치로 주내 데이터센터 시장의 거래가 둔화되고 있다.

M&A activity has slowed, and there are plenty of possible reasons. An approaching election. A rise in global bond yields. Persistent concern about inflation. Geopolitical upheaval. Creeping increases in borrowing costs.

But the outsized influence of artificial intelligence, data center development and data-adjacent investment on all of the above seems to have paused.

According to data from the Corporate Deal Tracker, the exclusive database that tracks transactions involving Texas companies and Texas lawyers, the third quarter of 2026 saw declines in both volume and value from the previous quarter. It is the first time that has happened, with drops in both measures, across the seven quarters since January 2025.

Generally speaking, 2026 has been a year of megadeals, defined by value over volume. By the third week of October last year, there were 1,428 unique M&A transactions valued at just over $1 trillion. This year, volume has dropped to 1,170, but values, buoyed by deals involving data center development and data-energy demand, have already reached nearly $1.25 trillion.

Some dealmakers attribute the declines in volume and value to Texas's pause on permitting for data center projects, which is pending studies by the Electric Reliability Council of Texas and other state agencies.

In August, Gov. Greg Abbott directed ERCOT to pause any new connections to large-scale energy projects until their effect on grid operations and residential energy costs is studied in detail. In September, Abbott reiterated his earlier directive to ERCOT, adding the Texas Commission on Environmental Quality and raising concerns about water use and quality-of-life issues.

ERCOT is an independent system operator that governs the electrical grid in most of the state. However, 41 of Texas's 254 counties fall outside ERCOT's jurisdiction, particularly in El Paso and the West Texas Panhandle. By bringing in the TCEQ, Abbott's second directive aimed to include data center projects that had located in those areas.

The result, said Alain Dermarkar, a Dallas partner at A&O Shearman, has been a pause in dealmaking, particularly in the data center and power sectors.

"It's definitely had an impact," Dermarkar said, referring to the governor's directives. "The September one is more far-reaching. It touches kind of everything through TCEQ. So, it has had an impact."

"You are seeing a delay [in the closing of projects] because people are trying to figure out exactly what the plan is. I don't think they think this is a permanent thing, but this is definitely something that's requiring a pause or substantial negotiations regarding risk shifting."

The pause in deals hasn't reduced lawyers' workload, Dermarkar said. Data center projects already face built-in delays related to supply chains and financing, but the Texas data pause is forcing renegotiations of deals already in place. Buyers are pushing for explicit closing conditions tied to ERCOT and other approvals, even when data center developers had planned for behind-the-meter power that would not require connection to the ERCOT grid or any other grid.

"Even if you're a project where you're essentially an island, if you're going to source your own power, if you're limited or restricted, or if there's some uncertainty about whether you can have that interconnect, some of the value you were expecting could be at risk," Dermarkar said.

An energy partner in Houston said some investors, particularly those who have invested in behind-the-meter and backup sources, are viewing the pause as an opportunity to review other issues, such as the potential future returns on their investments and the creditworthiness of the customers whose commitments to buy power or pay rent on data centers are being used to underwrite these massive projects.

"Ten years ago, you were building a data center, you work with the local utility and say, 'I need an interconnect and this is how much power I need.'

"Now, they're going up so fast that the grid can't keep up," the partner said. "The utility is saying, 'I can connect your data center in six years.' And the data center is saying, 'Well, that's nice. I want to be operational in two.'"

Data center developers' solution has been to build their own power sourcing behind the grid. That is an extremely expensive process, and one that carries its own problems and risks. Power infrastructure providers are willing to supply power sourcing, but only if it makes sense over the long term. Both they and the data center developers ultimately want integration with the grid. Data centers want to use the power, and energy providers, whether solar, wind, nuclear or natural gas, want to sell the power as a return on their massive investments once those data centers connect to the grid.

"Everybody's long play is to be connected to the grid," he said. "They want to be on the grid because it's reliable."

But assuring that reliability is part of the problem. Electricity from multiple sources must be balanced in ways that make interconnection difficult, or even destructive, to the grid. This is a problem that has been underappreciated amid the rush to make 20- or 30-year investments in hyperscale data centers that cost, at a minimum, tens of billions of dollars.

"It's the part of the problem that power is a lot harder to manage than people generally appreciate," said the energy partner. "I think we live in a world where we tend to think in terms of molecules, air, liquids, things we're familiar with, and electrons don't behave that way. There are voltage issues; there are amperage issues. And you have to have the right equipment to regulate the power that you are trying to put on the grid to make sure it is exactly at the voltage and amperage that it needs to be."

Investors, he said, are having to ask serious questions about the long-term viability of these massive power projects and what costs await at the end of their contracts. Assuring that the power can be interconnected is one of the major questions under review, and not just by regulators.

"The data center is signing up and saying, 'I will do it for X number of years.' The data center's thinking is, 'I'll probably be able to get cheaper power from the grid over time, and when there's a connection, the power lessee can sell into the grid,'" said the dealmaker. Lenders and investors in power infrastructure want to ensure that excess energy can be sold without investing billions more on the back end.

"It is an integral part of the financing," he said. "The power from these assets is being used for up to 20 years. Whether the data center is buying it or the grid's buying it, someone has to think of financing a power plant, and the power plant is feeding power to the data center."

"All the financiers care about is that somebody is buying this power," he said.

The Texas Lawbook is an online news publication focused on business law in Texas. For more legal news, visit texaslawbook.net.