North American power and utilities deals insights: Q2 2018
Rationalizing portfolios, evolving business models, growth and yield drive deal activity
Consistent themes resonated in the second quarter of 2018 in the North American power and utilities industry. At the forefront, companies continue to analyze their portfolios and are using the mergers and acquisitions (M&A) market to rationalize around core businesses; continued evolution of business models persist in the industry, with one example being merchants adding retail load to compliment existing generation portfolios; industry participants are using the M&A market to add avenues for growth; and yield continues to drive investment decisions, particularly for financial players this quarter.
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Trends and Highlights
- Overall deal value decreased by 20 percent in Q2 2018 as compared to prior quarter, despite a 33 percent increase in deal volume.
- Strategic and Corporate deals drove deal value this quarter. In Q2 2018, 75 percent of total deal value was from Strategic buyers and 75 percent of total deal value represented Corporate targets.
- The renewable sector accounted for 27 percent of deal value in Q2 2018 compared to 36 percent of deal value in Q1 2018, a decline of $4.1 billion.
- Inbound deals were limited in the quarter in terms of deal value, representing 15 percent of total deal value; however, inbound deals accounted for 25 percent of the quarter’s deal volume.
- Natural Gas Transmission and Distribution continues to trade at the high end of the range of multiples for subsectors within the industry.
