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Reconfiguration in response to geopolitical shifts and the energy transition will drive M&A in EU&R sectors in the second half of 2024.
At the start of the year, we wrote: "Unlike many other sectors, M&A activity in the energy, utilities and resources (EU&R) sectors held up well in 2023, driven by companies' need to adapt to the energy transition, secure supply chains and meet their own decarbonisation and transformation goals." This remains true, and at the midpoint of 2024, the EU&R sectors continue to be an exciting space for global M&A. Read on for PwC's latest insights into M&A trends and developments in EU&R.
In the coming months, companies with strong balance sheets are poised to capitalise on emerging M&A opportunities as the industry landscape undergoes significant change. These shifts are driven by new geopolitical realities, government initiatives, and an ongoing focus on energy transition and security.
Main trends include continued consolidation in the mining and metals sector, particularly in deals aimed at securing critical mineral supplies. In oil and gas, megadeals (transactions with a value of more than US$5bn) are driving corporate consolidation as companies seek to diversify their portfolios and realise synergies. Renewable energy developers are monetising assets in response to higher financing and construction costs, while listed utilities are selling non-core assets to fund development, especially in the gas subsector. Meanwhile, the chemicals sector is seeing subdued deal activity due to energy price volatility and sustainability pressures.
Across the board, EU&R companies, along with those in other sectors with EU&R supply chain exposure, are increasingly engaging in ‘friendshoring’ to secure key raw materials. The US stands out as an attractive M&A destination, thanks to economic incentives and advanced infrastructure.
Sustainability continues to be a crucial factor in M&A decisions, with regulatory frameworks strongly influencing investment strategies. We anticipate a rise in M&A activity in the second half of 2024, particularly in the US, as companies seek to optimise portfolios, ensure regulatory compliance, and pursue strategic consolidation.
M&A in energy, utilities and resources Key themes to watch: spotlight on reconfiguration
Restructuring is becoming essential across all sectors, driven by strategic consolidation, government incentives, and sustainability, as highlighted in our outlook at the beginning of this year. Companies are adapting to secure stronger positions and forge innovative partnerships, driving global M&A activity. This reconfiguration imperative is likely to play out across all EU&R sectors.
Consolidation
Consolidation is key for scaling and improving economics. Major deals such as Diamondback Energy’s merger with Endeavor Energy Resources, ConocoPhillips’ proposed acquisition of Marathon Oil Corporation, and Chesapeake Energy’s proposed merger with Southwestern Energy Company signal ongoing consolidation, with more expected in the latter half of 2024.
Supply security
Security of supply is a top priority in the EU&R sectors, particularly with regard to the impact of the electric vehicle (EV) value chain and energy security in the power and utilities sector, driving companies to collaborate outside their traditional sectors. Examples include car manufacturers securing lithium and data centre operators investing in green energy sources.
Regulation
Government policies such as the US IRA and the EU Green Deal are significantly accelerating the need for transformation. These schemes, through tax incentives, government-backed capital and policy changes, are driving investment in low-carbon projects and M&A activity in the EU&R sectors. Sectors such as batteries (including critical minerals) and energy storage, hydrogen fuel and carbon capture infrastructure are set to benefit, creating new M&A opportunities.
Portfolio optimisation
As transformation accelerates, companies are optimising their portfolios to focus on core strengths. We expect to see more M&A, partnerships, and strategic alliances, particularly to secure critical supply chains and enter new verticals. Partnerships in areas such as data centres are becoming more common as part of this optimisation process.
Energy, utilities and resources deal volumes and values, 2019-H1'24
Sources: LSEG and PwC analysis
Global M&A trends in energy, utilities and resources
A brief look at the different segments of the EU&R sectors reveals that the clean energy transition, supply chain security, and portfolio optimisation are the dominant drivers of M&A activity:
Mining and metals
M&A remains crucial for mining and metals companies to stay competitive, drive transformation, and secure resources for future growth. In the first half of 2024, dealmaking continued to be strong, although some deals were delayed due to regulatory approvals and pricing disagreements. Key trends for the remainder of the year include ongoing consolidation to refine business strategies and reposition asset portfolios, and continued robust activity in critical minerals deals to secure supply. The race to secure supply is expanding beyond mining companies and financial investors to include downstream players and sovereign wealth funds seeking diversification. Furthermore, partnerships with non-mining companies remain attractive, and there is still a strong focus on sustainability as a competitive advantage. Despite short-term challenges, we expect M&A activity in the mining sector to remain robust, underlining its importance to the success of most other global industries.
Oil and gas
Oil and gas M&A activity remained strong in the first half of 2024, driven by factors such as supply security, portfolio diversification, and improved production economics. Following recent corporate mergers, we expect to see an increase in divestments as companies optimise their portfolios by selling off non-strategic assets, similar to Chevron’s planned asset sales following its acquisition of Hess, which are expected to generate US$10-15bn in proceeds by 2028. Demand for liquefied natural gas (LNG) continues to grow, prompting further consolidation among companies involved in LNG transportation, storage, and refining. However, uncertainties surrounding the US election and restrictions on new LNG projects in North America may limit new developments. Globally, government policies and incentives are encouraging traditional oil and gas companies to invest in clean energy technologies, including carbon capture, and digital innovation. Examples are the IRA, the US Infrastructure Investment and Jobs Act, the European REPowerEU Plan, and the European Net-Zero Industry Act. The cyclical nature of the industry and the transition to clean energy require companies to balance M&A strategies, taking advantage of current high energy prices while preparing for a gradual decline in oil demand.
Power and utilities
M&A activity in the power and utilities sector in the second half of 2024 is expected to be driven by several key trends. The growth of renewable energy assets, fuelled by incentives such as the IRA, has significantly increased investment in solar, wind, hydrogen, and battery storage, especially in Asia. Persistently higher financing rates and rising development costs have motivated developers with less capital to sell assets or entire platforms. Listed utilities are also divesting non-core assets to fund development pipelines, with gas and thermal assets being prominent in recent deals due to sustainability concerns. Overall, the sector is expected to see continued M&A growth, particularly in traditional renewables and clean technologies. As bid-ask spreads narrow, we expect transaction velocity to increase, with utilities focusing on conserving capital and recycling non-core assets, especially in gas-related areas. Acquisitions will likely be limited to financial buyers interested in regulated green opportunities and transmission infrastructure.
Chemicals
In the first half of 2024, the chemicals industry saw below-average deal values and volumes due to elevated interest rates, weak industrial demand, sustainability issues, and geopolitical tensions and regional wars. We expect M&A activity to pick up in the second half of 2024 as fears of a global recession subside and interest rates are lowered. Factors likely to drive this resurgence include shifts in global supply chains, increased private equity exits and a focus on reshoring, particularly in the US. In addition, the ongoing momentum to divest non-core assets, optimise portfolios, scrutinise supply chains, decarbonise operations, liquidate non-ESG-friendly assets, and meet sustainability obligations – including the upcoming Carbon Border Adjustment Mechanism legislation – is expected to play a significant role in driving M&A activity. Meanwhile, Europe faces challenges such as high production costs and overcapacity, leading to plant closures.
"The reconfiguration of the industry across the energy, utilities, resources, and chemicals sectors is being driven by a clear focus on supply security, portfolio optimisation, and adapting to expanding government incentives and regulations."
Marc Schmidli Partner, Deals Leader, PwC SwitzerlandM&A outlook for energy, utilities and resources in the second half of 2024
The 2024 mid-year outlook for global M&A in the EU&R sectors reveals a dynamic environment shaped by geopolitical changes, government policies, and the ongoing energy transition. Key factors driving this activity include efforts to consolidate, secure critical minerals, and diversify portfolios. Government regulations and incentives, along with a strong focus on sustainability and energy security, are also significant influences. Noteworthy trends include increased M&A in the mining and metals sector to lock in critical supplies, continued consolidation in oil and gas, and a rise in dealmaking in renewables driven by higher costs. In the months ahead, companies with solid financials are best equipped to take advantage of M&A opportunities.
M&A industry trends in Switzerland
Learn about the key trends driving M&A activity in Switzerland
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