With net-zero targets for many companies on the rise — and showing no signs of slowing down — more and more companies are turning to mergers and acquisitions to help with their transition to greener and more sustainable energy solutions. Regulatory compliance is pushing sustainability in sectors like utilities, transport, manufacturing, and, of course, energy, all of which means more businesses are seeking ways to expand their market positions by acquiring companies offering sustainable solutions. Here are just a few reasons the global energy transition is driving deals. 

Why the Global Energy Transition is Driving M&A

Regulatory compliance is driving a need to adapt

The biggest reason the energy transition is playing such a strong role in driving mergers and acquisitions comes down to rapid growth potential and regulatory compliance and governance. Companies globally face stricter regulations on carbon emissions than they even did five to ten years ago especially in heavy industries. In order to align with these new regulations and standards, acquiring existing companies offering sustainable solutions that already meet compliance criteria can be a major boon. For efficiency as well as a competitive edge, acquiring an established, compliant, company could be the most expedient and cost-effective option to accelerate energy transition goals.

“At TerraFive we see companies that are further advanced in the energy transition towards sustainable solutions growing much faster than traditional players,” says Michael D’Onofrio, Founder & CEO at TerraFive, a UK-based sustainable investment firm. “This is due to a combination of taking market share from existing players, for example solar and wind taking share from oil and gas in electricity production creating the need for new technology solutions, and the energy transition opening up new markets that did not exist previously such as the optimisation services for energy storage solutions such as utility-scale batteries.”

M&As offer expedited access to sustainable technologies

One key driver of traditional M&A is just as relevant, if not more so, in the world of energy and sustainability. When companies acquire another company, they gain access to technology and other innovations that can help their business grow and expand. Amidst this global energy transition, rapidly acquiring sustainable energy solutions such as battery storage technologies, advanced materials that enhance efficiency, or micro-grids and small scale renewables means that larger businesses can immediately add these innovations to their portfolio of solutions and operating models. 

Companies look to M&A for energy diversification

For energy companies used to operating in more traditional spaces like oil and gas, diversification is synonymous with building an enduring business with continued relevance. Engaging in an acquisition for these types of companies could mean that their energy portfolios become more resilient than being all-in on fossil fuels. Simultaneously, this choice allows them to better position themselves as the market continues to shift towards sustainable solutions.

As D’Onofrio explains: “We see cross-border M&A increasing in this space especially into economies that are leading in the energy transition such as UK & Nordic regions due to a combination of physical installed capacity, sophisticated capabilities that can be exported and advanced technology solutions. This creates investment opportunities in building industry and country champions that are attractive M&A targets for strategic acquirers.

How Dealsuite plays a role in energy transition M&A

A platform like Dealsuite can be instrumental when it comes to helping companies achieve their sustainability goals through mergers and acquisitions. Since Dealsuite is active in more than 50 countries, businesses are able to explore a broad array of companies that could enable a faster, more efficient energy transition in just a few clicks. Get a broad overview of buy- and sell-side deals and connect with other M&A professionals across Europe through Dealsuite.

“We use Dealsuite daily to engage on new acquisition and investment opportunities and also share our target themes and investment criteria at scale with advisor networks,” D’Onofrio notes. The platform is useful for both identifying target companies that may be a right fit as well as negotiating acquisitions and finalising deals. Dealsuite’s solution helps companies more quickly adapt to the ever-changing demands the energy transition places on global companies.

From expanding market presence to enhancing technological capacity, the sustainability movement and global energy transition are driving a flurry of M&A activity — and should continue to do so for the foreseeable future. As market conditions continue to evolve, platforms like Dealsuite become more and more necessary, allowing companies to navigate the complex energy transition with efficiency. 

Want to read more about the energy transition in M&A? Explore our Sector Monitor on Transportation & Logistics 2024 for valuable insights!