We are pleased to present the report Time for transition: Energy M&A 2022. This report provides invaluable insights into the energy M&A landscape in Europe, and the opportunities and challenges facing dealmakers.
A positive outlook
Respondents are overwhelmingly positive, especially for Europe. Nearly two thirds (65%) say they are planning to invest in Europe in the next three years. The massive availability of funds coming from the EU level for post-pandemic recovery – including the phasing out of coal – is attracting new investors.
“2021 has delivered a bumper crop of energy sector deals, notably in the power and transmission subsector, and the coming year is likely to be just as busy” says Munir Hassan, Head of the CMS Energy & Climate Change Group. “Energy transition is undoubtedly the primary driver for M&A in the sector and it is likely to remain so.”
Highlights include:
- Opportunities and obstacles. Our study reveals that dealmakers are racing to acquire new capabilities (particularly ones in renewables) and divest old ones that no longer fit their business models. Divestments predominate, with 30% looking to sell off assets or subsidiaries. Meanwhile, 25% are considering acquisitions and 20% of respondents are considering both divestments and acquisitions.
- ‘Bargains’ and distress drive deals. Respondents are clearly anticipating a bumper crop of bargains in 2022 with a majority (55%) expecting undervalued targets to be the leading driver of M&A activity. This finding is echoed by sell-side data, which shows distress-driven M&A as the likely top driver over the coming 12 months.
- The COVID effect. Respondents are divided over how COVID-19 has affected their dealmaking appetite to date. Half of the participants say the pandemic has stimulated their appetite for dealmaking, while 40% point to a decrease.
- ESG picks up pace. Given the rising tide of regulation around ESG, it is perhaps not surprising that seven out of ten respondents expect an increase in ESG scrutiny in deals over the next three years
"One of my takeaways from COP26 is the start of a move towards a more open and quantifiable measurement of emissions and environmental impact. We can expect that in time ESG and climate reporting will be elevated to a similar position as financial reporting. Businesses will need to build a clear sustainability strategy and targets, supported by robust measurement and accountability."
Cecilia van der Weijden, Partner, Corporate/M&A and Head of Energy & Climate Change, CMS Netherlands
About the survey
In the second quarter of 2021, Mergermarket surveyed senior executives from 240 corporates and 90 PE firms based in Europe, the Americas and APAC regions about their expectations for the European M&A market in the year ahead. Of these, we surveyed 20 global energy companies from the following subsectors: fuels, refinery and renewable fuels; multi-source energy producers; renewable energy producers; oil and gas companies. All respondents have been involved in an M&A transaction over the past two years.
