M&A activity in the renewable energy sector set to increase, says report
The renewable energy space is expected to see a high level of M&A activity in the next 12 months despite changes to government incentive schemes in Europe and regulatory uncertainty in the United States, according to the third edition of M&A in Renewable Energy – Global Outlook 2012.
The report, published by Rödl & Partner in association with mergermarket, draws from interviews with 100 renewable energy M&A professionals from the corporate, private equity and investment banking communities to examine the challenges, opportunities and underlying deal drivers in the sector.
The wind and photovoltaic (PV) subsectors are expected to experience the most significant M&A activity, and respondents believe both wind and PV will achieve grid parity as early as 2015 or 2016 in Germany, Italy and Spain.
As far as specific geographies are concerned, 46% of respondents expect the highest levels of M&A to come from the Asia-Pacific region, followed by Europe and North America. The experts frequently note rising demand and a desire for energy independence as important motivations for renewable energy development in emerging markets. The wind and photovoltaic (PV) subsectors are expected to experience the most significant M&A activity, and respondents believe both wind and PV will achieve grid parity as early as 2015 or 2016 in Germany, Italy and Spain.
Respondents expect government support (76%) and cash-rich corporate buyers (47%) to be the most significant external drivers of M&A in the next 12 months. The top internal drivers include an acquirers’ appetite for new technology (72%) and their desire to grow market share (62%), followed by attractively low valuations.
Recent M&A data shows the renewable energy sector has proved remarkably resilient despite eurozone volatility, constrained bank lending and changes to government incentive programmes. In 2011 the sector saw 210 deals worth EUR25bn, representing a 135% increase in value and a modest 2% increase in volume against 2010.
Additional findings in the report include:
• 47% of respondents expect special purpose vehicles (SPVs) to be the most widely used deal structure.
• Access to financing will present the largest obstacle to dealmaking, say 49% of respondents.
• 84% of respondents believe PE buyouts will increase over the coming year in the sector, up from 55% in 2011.
• Trade sales will comprise the primary route to exit from PE portfolio companies, say 54% of respondents.
Oliver Schmitt, Rödl & Partner Munich, says: “It is a clear trend for 2012 that renewable energy companies will continue to remain a dominant factor in the M&A market. This is partly due to the consolidation of this market, where smaller players will be absorbed by larger competitors. Furthermore, PE funds and pension funds are aware that renewable energy projects and parks may provide quite high yields on their investment compared to traditional investments in other sectors.”
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