The energy transition towards net zero, while ensuring we move to a sustainable future of more secure locally generated energy supply in the medium to longer term, has resulted in increasing levels of investment and M&A activity in the energy sector – not just in renewables but also traditional energy services which are proving to be essential for the transition to gain momentum.
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Opportunities in Scotland’s offshore services industry
Most notably, the skills, technologies and infrastructure which has served the North Sea for decades is now providing outstanding opportunities for those looking to make a mark in the energy market of the future.
This has fuelled a rise in activity for M&A in Scotland’s offshore services industry over the past year, which leading independent Scottish law firm Burness Paull, with its strong focus on the energy sector, can offer expert insights into.
The Burness Paull team have noted an increasing number of buyers seeking to acquire assets that will support the transition into different energy sectors such as renewables, hydrogen and carbon capture, utilisation and storage (CCUS). Those looking to move into the offshore wind sector, in particular, have focussed their attentions in this area.
Helen Dickson, a corporate and M&A partner at the firm, said: “The market for M&A activity has definitely picked up. There are a number of buyers who are looking to acquire assets that will allow them to lead in the energy transition, particularly those types of businesses where there is an obvious shift from oil and gas to the provision of similar services in offshore and onshore locations.”
Central to this rise, according to Helen, is the strong foundation created by the hugely experienced and technologically capable oilfield services industry.
She added: “Major renewables and clean energy projects across Scotland are progressing and they need a supply chain. There are a number of investors that are looking to acquire what were traditional oil and gas service companies whose services can be repurposed to support these projects, such as construction or projects and servicing of ongoing operations after the construction phase.
“This strategic approach ensures a smoother transition and underscores the adaptability of established players in the energy market.”
Repurposing oil and gas service companies
Despite the positive trends, Helen and her colleagues observe that there is an extended deals timeline, especially in the early stages. The intricate nature of these transactions demands increasingly thorough due diligence, highly detailed negotiations at the outset and strategic planning, contributing to the increased interval between initial discussions and final agreement being reached.
This lengthier period, however, does not seem to be dampening the overall increase in M&A activity, highlighting the resilience and strategic importance of the sector to achieving net zero. It signals a shift in the market dynamics, where investors are now more focused on the future opportunities in new and emerging energies.
“Over the past two to three years, we’ve seen a notable surge in energy transition-related work,” Helen explains.
“That can range from deals involving companies involved in installation of energy performance meters in domestic and commercial spaces or EV charging, to advising clients on hydrogen projects and CCUS initiatives. Additionally, almost regardless of sector, there is now a genuine commitment to a sustainable and varied energy future, with businesses and investors actively participating in shaping a more environmentally conscious energy landscape.”
Funding landscape in the energy transition
Funding is, of course, key to the energy transition and Burness Paull knows the key players and funding sources.
“There is a diverse mix of international investors, including sovereign wealth funds displaying a keen interest in global infrastructure projects, and focussed private equity firms,” Helen says.
Although multiples offered generally by buyers remain cautious, for businesses with a strong technology angle higher multiples can be achieved. As Helen points out: “Companies who own innovative technologies capable of global deployment continue to attract higher multiples, reflecting the continued emphasis on technology-driven solutions in the evolving energy market.”
Burness Paull’s observations underscore the nuanced dynamics of M&A activities in the energy transition era. The extended timelines for deal closures, the diversification of investment into new energy sources and the shifting investor landscape all point to a market in transition.
As businesses strategically align themselves with a changing market, investors are recognising the potential to invest now to maximise opportunity in the medium term in what will be a new era where a variety of new and existing energy sources contribute to our overall energy needs.
To find out more about Burness Paull’s Energy M&A team head over to the website.
