There was a “bumper crop” of energy sector mergers and acquisitions (M&A) in Europe in 2021, notably in the power and transmission subsector, according to a new survey by law firm CMS.
The report suggested that the coming year is likely to be as busy as 2021, driven by the energy transition, the company said. Policy will steer investment towards decarbonisation, digitalisation, renewables and storage and the quickest route to these capabilities for traditional energy players will be ‘inorganic growth’ (ie M&A).
Key developments include:
• The quality and performance of renewables is now well established, both in hardware and in installation. The progressive de-risking of renewables will continue to boost their attractiveness, broadening the pool of available capital. “The infrastructure to support renewables initiatives is maturing and the advancement of battery storage technology, for example, has successfully accelerated adoption,” said Babita Ambekar from CMS Singapore.
• ESG “is now a mainstream concern” and financial institutions are pivoting towards sustainable finance, fuelling increased M&A activity in energy transition assets.
• The digital revolution means the energy sector is transitioning from a traditional service industry to a complex multistakeholder system. Industries that have developed innovative energy technologies such as smart grid are extremely attractive.
The report, Time for transition: Energy M&A 2022 Dealmaking in the age of COVID, digital disruption and energy transition, said that in 2021 UK M&A accounted for 22% of all European deals by value and 14% by volume. And post-Brexit 40% of the respondents thought that the UK market will become more attractive to inward investors.