PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.
Broad investor interest in the sector, environmental, social and governance (ESG) efforts, and initiatives to decarbonize helped drive M&A activity in the power and utilities sector in the last 12 months through May 15, 2021, back to pre-pandemic levels (52 deals in the last 12 months vs. 52 deals in 2019 and 42 deals in 2020). On a deal value basis, the total increased from $42.9 billion in 2019 and $48.3 billion in 2020 to $58.4 billion. While the first half of 2020 saw sizable reductions in deal value at $13.3 billion, megadeals returned in the second half of 2020 and first half of 2021 (through May 15, 2021) with $20.7 billion coming from megadeals (deals greater than $5 billion). The industry experienced increases in both deal volume and value over this period, with growth additions and yield also top-of-mind for dealmakers.
With the onset of the COVID-19 global pandemic in 2020, M&A activity in the power and utilities sector saw initial reductions in both deal volumes and total deal value. However, deal value rebounded in the second half of 2020 and first half of 2021. While various factors impacted the deal market in the last 12 months — including the broad impacts of the pandemic — dealmakers nevertheless managed to strategically approach the deals market. Additionally, deal activity underscored how companies are prioritizing ESG initiatives.
As we move further into 2021, we expect opportunistic M&A activity from a broad pool of investors to continue as industry participants look to rebalance and rationalize portfolios and deploy capital into attractive growth and yielding investments (such as we saw in the last 12 months). Additionally, we expect renewables and ESG initiatives to continue to drive investment theses and deal activity in the sector.
In the last 12 months through May 15:
“Focus on carbon reduction and national infrastructure aspirations continued to influence deal activity in LTM (the last 12 months), as balancing of goals and related growth opportunities against needed reliability investment piqued investor interest”
Jeremy R. Fago
Principal, Power & Utilities Deals Leader, PwC US
Power & Utilities Deals Principal, PwC US