Environmental, social and governance (ESG)-related mergers and acquisitions (M&A) activity is maturing, as corporate leaders across all energy, utilities and resources (EU&R) sectors take a more proactive approach to ESG transition. Until recently, ESG-led M&A, such as the disposal of carbon-intensive assets, was largely considered reactive to regulatory and activist shareholder pressure. Today, companies are managing ESG risks as part of their overall strategy, and view ESG as an opportunity to unlock value. We expect to see continued portfolio optimisation, consolidation, strategic partnerships and capability plays, as businesses reshape asset portfolios and take advantage of opportunities in high growth markets such as energy transition, carbon abatement and decarbonisation.
Outside ESG, we expect robust commodity prices, generous availability of capital and broad concerns over supply chain security to impact M&A activity across the industry. As a result, consolidations are expected to continue throughout the gold sector globally, and in the upstream oil and gas sector in the US. We anticipate that chemical businesses will seek to secure sources of raw materials closer to their production assets through targeted M&A. We also expect infrastructure funds to continue to deploy large amounts of capital into power and utilities, midstream oil and gas assets, and renewables.
“ESG is now the main focus of deal activity in the energy, utilities and resources sectors, and we expect it to remain that way for some time to come.”
Deal volumes and values in the energy, utilities and resources industry increased in 2021 over the prior year by 8% and 67%, respectively. Highlights by geography and sector include:
Global energy, utilities and resources companies and their investors are putting environmental, social and governance at the heart of their strategic agendas. We expect business leaders to move quickly to rebalance their portfolios and to pursue value creation opportunities in ESG growth areas such as renewables, carbon capture, battery storage, hydrogen, transmission infrastructure and other clean technologies. Robust commodity prices, a plentiful supply of capital together with lingering concerns over the security of raw material supply will result in EU&R dealmakers continuing to engage in more traditional forms of M&A, such as consolidations, capability-driven acquisitions and divestitures of non-core assets.
About the data
We have based our commentary on M&A trends on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 31 December 2021 and as accessed on 2 January 2022. This has been supplemented by additional information from Dealogic and our independent research, and includes data derived from data provided under license by Dealogic. Dealogic retains and reserves all rights in such licensed data. Certain adjustments have been made to the source information to align with PwC’s industry mapping. Average deal value is calculated based on announced deals with a disclosed deal value only.