Energy Transition – a key driver of M&A activity

Charlie Smith, strategy & transactions director at Deloitte

Energy transition is fast becoming one of the most significant drivers of mergers and acquisition (M&A) activity in the UK as investors and corporates continue to adapt their strategies to meet ambitious net-zero targets and capitalise on the continued growth in the sector.

Regulatory compliance and governance, growth potential, and the need for businesses to meet strict net-zero targets by 2050 are just some of the reasons why M&A is playing such a pivotal role in many business strategies.

Disposing of non-core assets alongside acquiring existing businesses that are already offering sustainable solutions are helping to expedite change and drive efficiencies.

It is this collective drive towards a greener economy that has led to energy transition funds emerging at an unprecedented rate, adding to the investor landscape and presenting a once-in-a-generation level of innovation in the global energy system.

M&A as a driver for change
The Midlands aims to be a carbon-neutral economy by 2041, and to achieve this, there needs to be a huge transformation of the region’s energy system.

This transformation is still in its early stages, but businesses are adapting their strategies and looking for market M&A opportunities across the full lifecycle, from securing green energy generation for operations, to decarbonising supply chains and products.

Companies with an ESG focus, strong track records, certified sustainable practices and transparent reporting are drawing interest from investors both in the UK and globally, which are already attracting high valuations.

The convergence of robust investor appetite, technology, and ESG principles is creating a dynamic landscape for M&A activity across multiple sectors.

The green challenge
The UK has set a target of 2050 to become a net-zero economy, but the demand for energy continues to grow at pace.

To put the challenge into perspective, it is believed that the EU’s transition to a net-zero economy will require over $32trillion of investment in energy and related technologies between now and 2050, with the EU’s electricity more than doubling during this time.

The UK has risen to the challenge so far with a range of innovative solutions coming to market and as we move further into 2025, we expect an uptick in M&A activity driven by businesses looking to move towards greener energy and invest in new technologies, infrastructure, smart grids, raw materials, storage and synthetic/bio fuels.

For the UK and Midlands to achieve decarbonisation and net-zero ambitions, governments and policymakers will need to work with industry to create a stable environment that inspires confidence for long-term investment.

Getting the balance between regulation, taxes, and incentives is a hugely complex challenge for policymakers, and we are seeing differing global approaches emerging. As the landscape evolves, we expect M&A to continue at pace in this sector as investor strategies develop.

How we can help
Charlie Smith is a director specialising in M&A within the strategy & transactions team at Deloitte. The team is focused on identifying opportunities, appraising investments through due diligence and supporting businesses and investors looking to diversify their energy portfolios through the whole M&A lifecycle.

To find out more about how the team can support your business, please email: charliewsmith@deloitte.co.uk