Energy, utility, net-zero industries offer M&A opportunities: report
This year is projected to witness a rebound in mergers and acquisitions (M&A) deals, marking an end to the sluggish market conditions experienced over the last two years, according to a Samil PwC report on Wednesday.
The report says that a general recovery in investor sentiment, coupled with the market’s increased adaptability to factors such as inflation, high interest rates and geopolitical tensions, is expected to generate more M&A opportunities throughout this year. Additionally, the accumulation of assets eyed for sale during the market downturn over the past couple of years is anticipated to contribute significantly to the abundance of M&A opportunities.
By industry, the energy, utility and material sectors are anticipated to witness active M&A transactions this year. This surge in activity is attributed to these sectors’ pursuit of portfolio transformation aimed at achieving carbon neutrality and ensuring a stable supply chain network.
Consumer goods, health care, industrial materials and automotive sectors are also expected to undergo major portfolio transitions through the sales of non-core assets.
However, the report forecasts that M&A activity in the financial sector is expected to be less pronounced than in other industries. This is due to the anticipated strengthening of risk management concerning non-performing assets, particularly as authorities focus on ensuring the capital soundness of financial institutions.
The report adds that M&A activities will continue for a while as companies strive to innovate and respond more effectively to global megatrends. These include digitalization, climate adaptation and demographic shifts.
Furthermore, the report notes a record-high amount of dry powder held by private equity funds, estimated at around $4 trillion last year. Dry powder is a slang term referring to marketable securities that are highly liquid and considered cash-like. This substantial capital reserve is expected to catalyze further M&A opportunities in the market.