Energy, Utilities & Infrastructure
The professionals in Energy, and Natural Resources work across a broad range of industries, including traditional and renewable energy markets. This coverage also includes any businesses working to address climate change challenges and promote decarbonised, environmentally beneficial, and long-term economic development.
- Transitions to lower-carbon energy sources and rising demand for renewable energy create substantial challenges and opportunities for the energy and natural resources industries, which play a vital role in influencing the future of the global economy.
Market View
- With interest rates anticipated to remain at record lows for the rest of 2021, there is no scarcity of funds available for deal-making. During this time, a lot of SPAC activity was focused on energy transition, especially in the US, which contributed to a lot of rivalry for such agreements.
- Political and regulatory changes are also influencing how companies in the sector think about mergers and acquisitions. Higher inflation, slower growth, regulatory change, social discontent, increased royalties, and more business or resource taxes can all be triggered by geopolitical responses to COVID-19 recovery, persistent trade tensions, and government changes. Bond yields, interest rates, business valuations, and asset liquidity are all influenced by these factors. All of these considerations, as well as the general uncertainty around their result, may deter or postpone investment and M&A activity in the impacted regions.
- While conventional energy sources continue to fulfil a significant portion of demand in global energy markets due to abundant supplies, developed and emerging economies’ climate-friendly policies and technological drivers are defining a new ecosystem.
- This ecosystem is built on the growing use of renewable energy sources, as well as the development of smart cities, smart mobility, and energy efficiency solutions. This trend is fuelling M&A activity across the board in the Energy, Environment, and Cleantech sectors.
Market Outlook
Global stock markets continue to be buoyed by rising economic activity and improved investor confidence. This leads us to expect that M&A deal activity will remain strong for the rest of the year—with the caveat that ongoing global trade tensions and uncertainty surrounding the outcome of upcoming elections in certain energy and resource–producing territories may dampen some investors’ enthusiasm.
Capital is a key enabler of deals, and the capital landscape in energy, utilities and resources continues to evolve rapidly, largely due to ongoing environmental, social and governance (ESG) activism by investors, governments and courts. What is now a global transformation to net zero will continue to influence M&A activity and capital project investment decisions within EU&R companies.
Special purpose acquisition companies (SPACs) are driving up deal multiples, competing against strategic buyers and private equity (PE) groups for technology-centric energy-transition assets.
