Neither the pandemic crisis before, nor the current war in Ukraine will stop the process of acquisitions and mergers in the energy sector, especially in the wind, solar and photovoltaic sector. On the contrary, it could even give a further boost given that European countries are trying to diversify their energy supply sources to reduce their dependence on Russian gas. M&A transactions in the European energy sector reached the record figure of 46,8 billion dollars in 2021, a trend destined to continue in 2022 as well. This is estimated by the Energy M&A Report of the law firm Cms, among the top ten at a international.
2021 was a year to remember for European energy M&A: the volume increased by 26% compared to the previous year reaching the highest number ever recorded since 2006. The outcome of the COP26 in Glasgow and the growing systemic pressure to the achievement of sustainable development goals that it has generated will ensure that European dealmakers in the energy sector will be even more involved in M&A transactions not only during 2022 but also in the next three years: almost two-thirds (65%) of the managers interviewed in the research declare that they intend to invest in Europe in the next three years. The massive availability of funds from the EU for the post-Covid recovery – including the energy transition – is attracting new investors.
While overall M&A activity has been strong, dealmaking has cooled off somewhat in FY2021 due to the resurgence of Covid, rising inflation and turmoil in global gas markets. Volume dropped from 129 deals in the first quarter to 116 in the fourth quarter. M&A deals in the energy sector, however, increased from $8,1 billion in the first quarter of 2021 to $20,2 billion in the fourth quarter.
The growing impact of ESG factors on the M&A agenda
According to the CMS report, ESG factors are playing an increasingly important role in the M&A agenda in the energy sector, in particular from the point of view of sales, given that energy operators aim to decarbonise their portfolios; as a result, 50% of respondents believe distressed assets will be the most important driver of sales this year.
At the same time, heightened attention to ESG is crippling the sector with 70% of energy executives expecting greater scrutiny of ESG compliance within agreements over the next three years.
Private equity and investors
As for private equity, in 2021, they invested a total of $5,7 billion. In the European energy sector, this is the highest value since 2016. Most of the European energy buyouts have been for alternative energy, including renewable energy andnuclear energy.
Non-banks and funds are expected to be the largest investors in the deals over the next 12 months. The involvement of Private Equity in energy M&A at the European level is growing strongly, with an increase of 65%, going from 4,0 billion dollars in 2020 to 5,7 billion dollars in 2021.
In this regard, 84% of the executives surveyed in the energy sector believe that financial investors prevail over companies when it comes to seizing the deal opportunities that have emerged in the context of Covid-19.
A fifth of respondents cite debt capital markets as source of funding more available: a widespread sentiment emerges towards less involvement of traditional banks in high-value transactions.
Tightening credit markets are a major concern and the cost of leverage is seen as a central risk in 2022, reflecting macroeconomic weakness.
Energy transition, M&A activities in Italy: record in 2021
2021 was also a record year for Italy in terms of investment and M&A activity in the energy sector: M&A deals and their value increased. “2021 proved to be a favorable year for deals in the energy sector, in particular for renewable energies, 2022 is likely to be equally or even more intense”, said the lawyer. Pietro Cavasola, Managing Partner of CMS in Italy. "The energy transition is undoubtedly one of the most important drivers for M&A and is likely to remain so."
good evening, can I have some information on photovoltaics please, thanks