Total deal value fell for the third year in a row, continuing its reduction from the banner 2016 deal market which saw $157 billion of total deal value, reducing to a total deal value in 2019 of $43 billion.
On a quarterly basis, after the lower third quarter deal market, Power & Utilities deal activity returned to higher levels in Q4 2019 with the announcement of the first mega deal ($5 billion+) of 2019. As a result of the registered mega deal and the 13 total deals of the quarter, Q4 was the strongest quarter on a deal value basis since Q2 2018. Q4 witnessed renewed interest from financial investors, accounting for 62% of total deal value for the quarter; renewables continuing to remain a key area of interest, contributing 43% to total deal value for the quarter; and strong inbound deal activity, contributing 62% to total quarterly deal value.
“Financial players returned to the forefront of deal activity, particularly as it relates to deal value with significant available investment capacity finding ample opportunity in the industry and as strategics continue their focus on digestion of previously announced mega deals.”
Canada Pension Plan Investment Board's (CPPIB) acquisition of Pattern Energy Group Inc. (Pattern Energy) for a deal value of $6.3 billion was the largest transaction of Q4 2019 and of 2019.
Mega deals ($5B and over)
CPPIB’s acquisition of Pattern Energy for a deal value $6.3 billion was the only mega deal announced in Q4 2019, and the first mega deal since Q2 2018.
We expect to see a continuation of themes in the Power & Utilities deals market in the new year, with yield, access to infrastructure, rebalancing portfolios, and balance sheet rationalization expected to drive deal activity. Renewables will remain as one of the key areas of interest for deal makers as federal incentives phase down/out. Emerging technologies, such as energy storage, are expected to have a gaining impact on deal activity. And lastly, with the recent decrease in interest rates, bid ask spreads and valuations may benefit, which could also have an impact on deal activity.
Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, the smartest deal makers look to experienced advisors to help them fashion a deal that works.
PwC’s Deals group can advise power and utility companies and private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed buy-side diligence, to developing strategies for capturing post-deal profits and exiting a deal through a sale, carve-out, or IPO. With more than 20,000 deals professionals worldwide, we can deploy seasoned teams that combine deep power and utility industry skills with local market knowledge virtually anywhere and everywhere your company operates or executes transactions.
Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, transaction structuring, M&A tax, merger integration, valuation, and post-deal services.
In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract peak value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divestiture process, we can help.
We define M&A activity as mergers and acquisitions in which targets are US-based companies acquired by US or foreign buyers, or foreign targets acquired by US or foreign pharmaceutical and life sciences companies. We define divestitures as the sale of a portion of a company (not a whole entity) by a US-based or foreign seller. We have based our findings on data provided by industry-recognized sources. Specifically, values and volumes used throughout this report are based on announcement date for transactions with a disclosed deal value greater than $15.0 million, as provided by Capital IQ, as of March 31, 2019, and supplemented by additional independent research.
Information related to previous periods is updated periodically based on new data collected by Capital IQ for deals closed during previous periods but not reflected in previous data sets. Deal information was sourced from Capital IQ and includes deals for which buyers or targets fall into one of the PLS industry sub-sectors: biotechnology, medical devices, pharmaceuticals, or other (such as contract manufacturing organizations). Certain adjustments have been made to the information to exclude transactions
Jeremy R. Fago
Principal, Power & Utilities Deals Leader, PwC US
Power & Utilities Deals Principal, PwC US