Power and utilities deals insights: 2021 outlook
North American P&U deal value recovered in the second half of the year, while the sector continues to navigate external factors
The COVID-19 global pandemic continued to impact M&A activity in the Power & Utilities (“P&U”) sector in the last twelve months (LTM) through November 15, 2020, with overall decline in deal volume compared to 2019 (41 deals in LTM vs 52 deals in 2019). However, on a deal value basis, total deal value increased from $42.9 billion in 2019 to $48.1 billion in LTM. While the first half of 2020 saw sizable reductions in deal value at $13.3 billion, megadeals returned in the second half of the year driving an incremental $31.6 billion in deal value from June 30 through November 15. The industry experienced growth in both deal volume and value during this time period due to megadeals such as the Dominion Energy Natural Gas Transportation and Storage / Berkshire Hathaway and PNM Resources / Avangrid deals.
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Deals 2021 outlook: M&A leads the economic recovery
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends
Power and utilities deals outlook
With the onset of the COVID-19 global pandemic in 2020, M&A activity in the P&U sector saw initial reductions in both deal volumes and total deal value; however, deal value rebounded in the second half of the year. While various factors impacted the deal market in LTM, including the broad impacts of the pandemic, dealmakers found ways to strategically approach the deals market. Additionally, deal activity in the second part of the year underscored how companies are prioritizing environmental, social and governance (“ESG”) initiatives.
As we progress into 2021, we expect pandemic related uncertainty to continue to impact the deal market; however, we also expect opportunistic M&A activity 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 second part of 2020. Additionally, as seen in LTM, we expect renewables and ESG initiatives to continue to drive investment thesis and deal activity in the sector.
Highlights of deal activity
- The P&U sector saw a decline of 21% in deal volume in LTM 2020 as compared to 2019. However, the sector experienced a 12% increase in deal value in LTM 2020 as compared to 2019.
- Strategic players drove deal value in LTM 2020, accounting for 74% of the total deal value.
- Corporate deals dominated the sector in LTM 2020, contributing 84% of the total deal value.
- Renewable deals remained a sizable portion of sector deal activity in LTM 2020, with 34% of the total deal value.
- ESG became a noted driver of deal activity as major players in the P&U sector focus on ESG investment and goals.
- The sector witnessed a resurgence of megadeals in LTM 2020, witnessing three megadeals accounting for 50% of the total LTM 2020 deal value.
Top 10 LTM P&U deals
Rank - #1 Value ($ billion) - $8.3 |
Rank - #2 Value ($ billion) - $8.0 |
Rank - #3 Value ($ billion) - $7.7 |
Rank - #4 Value ($ billion) - $3.6 |
Rank - #5 Value ($ billion) - $3.5 |
Rank - #6 Value ($ billion) - $3.3 |
Rank - #7 Value ($ billion) - $1.2 |
Rank - #8 Value ($ billion) - $1.1 |
Rank - #9 Value ($ billion) - $1.0 |
Rank - #10 Value ($ billion) - $0.9 |
“We saw a significant uptick in deal value starting in the second half of 2020 as ESG priorities created opportunities to re-evaluate portfolios and redeploy capital. We expect investor sentiment to drive activity while dealmakers balance ESG goals against still present infrastructure needs to support those goals.”
