Energy sector could see major M&A action in near future

With energy bills on the rise for consumers and the ongoing discussions around energy sources and the move to net zero, it’s perhaps not a surprise that this sector is one the experts are keeping an eye on when it comes to shake-ups.

For Head of Energy at Burness Paull Bob Ruddiman, one area of business he believes is going to be busy in the near future will be mergers and acquisitions.

He explained: “The oil and gas downturn and the pandemic have created a tough environment for energy-related companies in recent years and we have seen a visceral battle for survival that has brought a lot of change.

“But we are starting to see oil and gas producers have impressive results and the supply chain is generally posting better numbers.”

Bob continued: “Now what we are going to see is more strategic positioning to keep the lights on – it’s not just about what customers are paying for their energy but whether they have energy at all because we have seen how exposed we are when it comes to energy supply.”

For Bob and his team, this is a sign that companies, the industry and governments need to be more thoughtful about energy. This might mean bringing new money into the sector or it might mean businesses combining to offer something newer and more effective.

“The consequences of consumption need to be understood.

“We are going to need to harness energy from a range of sources – oil and gas, renewable and nuclear – and there’s the opportunity for massive investment in the future, as long as investors aren’t put off by the messaging the government is putting out. Government policy needs to be consistent and predictable to enable investment.”

With the difficulties of the past few years, many businesses already have their eye on creating efficiencies, developing their digital provision and moving into creating new technologies.

And now, with Scotwind, government targets and consumers’ changing expectations, these will become vital ways for companies to survive and grow.

“There’s a good chance that technologies and businesses will be acquired as part of the new plans – there’s significant scope within the emerging infrastructure that will be needed for the new era of energy and the practical realities of, for example, electric vehicle targets that have been set.”

He added that the mergers and acquisitions could see established and emerging businesses coming together.

“We are seeing traditional and new energy businesses working as teams, each with their own nuances and areas of expertise.

“They realise they can’t do these projects by themselves but they understand that collaboration can be the key to these projects coming to life.”

Bob continued: “We may also see companies in the supply chain who are developing new technologies and are already active in oil and gas that can be transferred to other areas of energy getting bought or becoming part of a bigger group.

“The expertise is here in the north-east, it’s just about using it in new ways that will fit the changes that the sector is already seeing and that we know will be coming in future. The opportunities outweigh the inevitable uncertainty.”

And Bob and the energy team at Burness Paull will be on hand to advise and help clients who want to make those moves.

We are going to need to harness energy from a range of sources – oil and gas, renewable and nuclear

The ScotWind programme has helped Scotland move towards net-zero targets with companies diversifying into this growing sector.