Energy M&A 2024 outlook

M&A activity in the energy, utilities and resources sectors will continue to be driven by investor interest in the energy transition.

Partner, Deals Leader, PwC Switzerland

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In contrast to many other sectors, M&A activity in energy, utilities and resources (EU&R) 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 targets. Despite ongoing economic uncertainty, we expect the EU&R sectors to continue to perform well in terms of deal value and volume in 2024. For a comprehensive summary of PwC’s latest insights into M&A prospects and developments in EU&R, read on.

There is one overarching theme that is driving dealmaking and the allocation of capital flows in the energy, utilities and natural resources sectors: the energy transition. This megatrend encompasses not only sustainability topics such as renewables and decarbonisation, but also energy security, supply chain security, and access to critical minerals in general – all areas that have come under the scrutiny of investors, regulators, and society.

As the number and diversity of investors grows, we’re seeing a noticeable increase in funds being directed towards M&A ventures, both greenfield and brownfield, aimed at driving the energy transition. At the same time, capital is likely to move out of assets that are not compatible with this transition and will instead go into net-zero oriented opportunities. As a result, some sub-sectors may face financing challenges. However, financially strong companies are likely to be well positioned to take advantage of potential deals and value creation options.

So far, the energy transition has been slower than expected, leading to speculation about whether 2024 will see more transformative deals. Although environmental, social, and governance (ESG) factors have traditionally been a deal motivator, economic challenges have recently shifted priorities. Nevertheless, we expect sustainability and energy transition to remain key deal drivers as stakeholders refocus on these topics in 2024

M&A in energy, utilities and resources Key themes to watch in 2024

The energy transition continues to be the primary driver of activity in the energy, utilities and resources sectors. Other powerful trends are:

Consolidation remains a key strategy within the EU&R sectors to improve economic performance and achieve greater size and scale. Notable examples from 2023 include Exxon Mobil’s planned acquisition of Pioneer Natural Resources for US$59bn, Chevron’s proposed purchase of Hess for US$53bn, and Newmont’s planned US$17bn acquisition of Newcrest. We expect this trend to continue through 2024.

Government policies, including tax incentives and capital support, are a key driver of M&A activity, particularly after the US Inflation Reduction Act (IRA) triggered significant investment in the energy sector. This act has led to similar incentive schemes around the world to promote low-carbon projects and accelerate carbon neutrality. Sectors such as batteries (including critical minerals) and energy storage, hydrogen fuel, and carbon capture infrastructure are set to benefit, providing new M&A opportunities. In 2024, the impact of government regulation, amid geopolitical risks, will significantly influence deal activity across regions.

Security of supply is a key concern 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. As geopolitical tensions rise, it remains a top concern for CEOs. Rising energy costs have spurred the adoption of on-site energy generation and behind-the-meter energy management. Companies from tech to retail are embracing renewable energy for self-generation. We expect this trend, along with supply and cost challenges, as well as the growing availability of technology and digital platforms, to attract strong investment through 2024.

In uncertain times, companies need to align their portfolios with their core strategies to make key investment decisions. Portfolio optimisation, essential in the current economic environment, may involve divesting non-core assets or improving the performance of others to navigate or prepare for economic headwinds.

“Globally, mergers and acquisitions will remain critical for EU&R companies aiming to achieve strategic goals related to the energy transition, as they seek opportunities that could lead to transformation and future growth.”

Marc SchmidliPartner, Deals Leader, PwC Switzerland

Spotlight on the EV value chain

In recent years, industries, sectors, and sources of capital have been merging activities to adapt to the energy transition, particularly in the increasingly overlapping industrial manufacturing and EU&R sectors, driven by the demand for electric vehicles. The EV value chain ranges from raw material sourcing and battery production to vehicle recycling, with growing interdependencies at each stage. For example, clean energy will drive the mining of minerals and metals for EV batteries.

Companies are strategically repositioning themselves through transactions to leverage this shift. Notable moves include energy companies acquiring lithium properties, such as Exxon Mobil’s plan to drill for lithium in Arkansas, and original equipment manufacturers (OEMs) investing in mining or securing supply agreements for EV production materials. General Motors, Ford, and Tesla have made significant investments and agreements to secure lithium and other essential materials.

This convergence and expansion of the EV value chain has significantly spurred M&A activity in the EU&R sectors – and will continue to do so in 2024. As companies prepare for a future dominated by EVs and the decline of the internal combustion engine, collaborative transformation efforts by different sectors will drive sustainable results and accelerate the energy transition.

Energy, utilities and resources deal volumes and values, 2019-2023

Sources: LSEG and PwC analysis

While dealmaking in many other sectors declined in 2023, M&A in EU&R remained active, attracting investors due to the sector’s importance for the energy transition, as mentioned above. M&A volumes and values in EU&R rose from 2022 to 2023 by 1% and 26%, respectively. The increase in deal values in 2023 was partly due to an uptick in the number of megadeals (transactions with a value of more than US$5bn), which jumped from six in 2022 to 15 in 2023. The majority of these were in the oil, gas, and mining sectors. Five of the 15 megadeals in 2023 were announced during the fourth quarter and accounted for almost US$150bn in deal value, providing positive dealmaking momentum also into 2024.

“E-mobility is gaining traction in Switzerland with the increasing adoption of electric vehicles and the development of infrastructure. The Swiss market has witnessed several transactions in the e-mobility sector as companies seek to strengthen their presence and capitalise on the growing market opportunities.”

Marc Schmidli Partner, Deals Leader, PwC Switzerland

Global M&A trends in energy, utilities and resources

A brief look at the different segments of the energy, utilities and resources sectors shows that supply chain security and sustainability requirements are the overarching themes for M&A activity:

The energy transition remains a key driver of M&A activity in the mining and metals sector, with a focus on securing critical minerals and building local supply chains through strategies such as minority stakes and partnerships. Despite short-term challenges, including lower demand from China and economic uncertainties, the long-term outlook for M&A remains very positive, particularly for battery minerals such as copper and lithium. We expect industrial companies to increasingly seek direct ownership or direct offtake arrangements with miners of critical minerals. In the gold mining sector, we anticipate mid-tier consolidation M&A, driven by scale, portfolio optimisation, and synergy realisation.

Commodity volatility, inflation, interest rates, and geopolitical factors are impacting the availability of debt capital, creating near-term challenges for oil and gas deals. However, with many producers now being financially stronger – as evidenced by lower debt, higher cash reserves, and stronger cash flow – we expect M&A activity to pick up in 2024. In North America, the focus has shifted from ESG-centric deals to portfolio optimisation and consolidation to improve asset quality and economics, and we expect this trend and higher valuations to continue. Globally, the push for upstream consolidation and portfolio optimisation will dominate dealmaking in the coming months. Companies need to manage both the cyclical nature of the sector and the shift towards clean energy. This requires balancing M&A activity to capitalise on high energy prices while transforming their business models for the future.

Portfolio optimisation and consolidation are crucial for large utilities to improve their balance sheets in a high interest rate environment, while energy security in Europe and policy incentives in North America are driving investment in the energy transition. Regulatory uncertainty is slowing major investments, while significant capital remains idle. Electrification is leading utility investment, with a focus on charging stations, heating, energy storage, and digital solutions. Investment in renewables, particularly solar, continues despite higher capital costs and cost inflation. At the same time, wind projects face economic headwinds and operational hurdles such as struggling OEMs, slow grid connection, and supply chain issues. We also expect oil and gas companies to continue to divest renewable assets to monetise them in 2024.

Despite underperforming in 2023 due to a weak economy and slow COVID-19 recovery in China, the chemicals sector sees signs of stabilisation in market conditions such as inflation, interest rates, and feedstock prices. Coupled with expected production increases in key markets, there is cautious optimism for M&A activity in 2024. Sustainability objectives, driven by the energy transition, technological advances, and circular economy investments, will significantly influence M&A trends, as will government regulations pushing for reduced emissions and sustainability agendas. Competitive dynamics between regions will also shape M&A, with North America and the Middle East offering attractive opportunities due to lower raw material costs. Furthermore, European regulations, including the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), present both challenges and incentives for investment, highlighting the importance of policy considerations in M&A decisions.

2024 M&A outlook for energy, utilities and resources

With significant access to capital, a continued appetite for investment, a drive to accelerate the path to net zero, and increased government regulation, we anticipate that dealmaking in 2024 will be fruitful in the EU&R sectors. Companies with strong balance sheets will have the most success because economic headwinds will keep some businesses from participating in the short term. For companies or capital pools that have been waiting on the sidelines, the tailwinds for many EU&R sectors are showing signs that 2024 could be the breakout year for transformational deals.

In Switzerland, the energy, utilities and resources sectors reflect similar trends to those seen globally. The landscape is characterised by various smaller transactions, undertaken to either align or transform business models to better suit the market dynamics. Notably, the Swiss EU&R M&A activity is dominated by domestic corporate buyers

Corporate vs. private equity, 2018 – 2023

Domestic vs. cross border buyers, 2019 – 2023

EU&R M&A deal volume doubled from Q3 to Q4 2023

Swiss Energy, Utilities & Resources deal volumes, 2018 – 2023

In terms of deal activity, we have seen an uplift in the industry in Switzerland towards the end of 2023.
Many producers have gained significant financial strength in recent years due to high commodity prices, resulting in lower leverage, large cash pools, and improved cash flows.
All of these attributes have historically led to higher levels of M&A activity.
In 2024, more dynamics are seen, with Swiss-based investors getting more eager to explore M&A as an instrument for growth. Swiss utilities are increasingly investing in new technologies related to batteries or hydrogen to support the country’s energy transition goals and improve grid reliability. These investments demonstrate their commitment to sustainable and innovative solutions as they seek to play a crucial role in the decarbonisation of Switzerland’s energy sector.
Among the increased activity recently seen in the EV value chain, noteworthy charging deals are:
- Landis+Gyr’s acquisition of Etrel (charging equipment) in 2021;
- spinoff and pre-IPO financing of ABB e-mobility in 2022;
- Shell’s investment in EVPass (charging network) in 2023;
- French startup Electra (charging infrastructure service provider) entering the Swiss market with €200m financing from Energy Infrastructure Partners and plans to deploy over 600 public charging stations in Switzerland.

M&A industry trends in Switzerland

Learn about the key trends driving M&A activity in Switzerland

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Marc Schmidli

Partner, Deals Leader, Zurich, PwC Switzerland

+41 58 792 15 64