What effect has energy transition had on mergers and acquisitions? Frank Fowlie, corporate partner in the Aberdeen office of law firm CMS, shares his opinion on this topic.
Energy transition is not a simple shift from oil and gas to renewables, but a fundamental transformation of the way energy is produced and consumed.
As part of the switch to lower carbon sources, oil and gas companies are seeking to expand their current energy mix and contribute towards lower emissions.
This clearly impacts on the development of new projects and the operation of existing infrastructure, but what affect has it had on M&As and how is that likely to shape deals in the coming year?
Exploration and production companies have seen the biggest potential impact – and they have certainly reacted.
We have seen Shell acquire electricity supplier First Utility and rebrand it as the renewables-only Shell Energy Retail, while Dong, Centrica and others have been busy selling their oil and gas assets.
BP recently completed two innovative M&A deals, with the acquisition of car charging network provider ChargeMaster and further investment into the Lightsource BP platform, which develops and operates solar farms in more than 13 countries.
Even within M&A deals for oil and gas assets, the shift in emphasis has been marked. Environmental and social governance is now an important diligence stream for any company seeking an oil and gas acquisition.
In the oilfield services market, the change has not been as pronounced.
But two deals which did merit attention during the past 12 months involved companies which have moved away from being predominantly oilfield services to being offshore wind service providers. 3Sun was acquired by Worley Parsons and GEV Group was sold by Maven Capital Partners to Bridge Fund Management.
Both deals demonstrate a shift in focus not just for the companies but also for investors and large engineering companies alike.
It will be interesting to see how investor sentiment is affected as the drive to change the energy mix gathers pace.
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