UK Energy, Utilities and Resources M&A activity reaches £18.2bn in 2023

• Energy, Utilities and Resources sectors recorded £18.2bn of M&A activity in 2023 in the UK, the highest amount for any individual industry in the UK in PwC’s Global M&A trends report
• Significant dealmaking activity in upstream operations contributed to deal values
• “We estimate 45% of the decarbonisation needed in the UK will have to come from technologies that are not yet commercially mature” - PwC UK Deals Leader Matt Alabaster.

In spite of headwinds that impacted overall deal activity, the UK’s energy, utilities and resources (EU&R) sectors recorded over £18.2bn of M&A activity in 2023, according to new data from PwC’s Global M&A Industry Trends 2024 outlook, the report’s highest overall value recorded by any individual industry in 2023. 

Whilst EU&R deals in the UK have been resilient in the last year, total deal values disclosed were 24% down on 2022 and, in total, EU&R sectors recorded 159 transactions in 2023, 18% less than the 193 deals recorded the year before. Of particular note, high value deals in 2022 included National Grid’s sale of a majority stake in its UK Gas transmission and metering business, alongside KKR’s acquisition of ContourGlobal, a British power generation business. 

The largest transaction announced in 2023’s full-year dataset was Harbour Energy’s $11.2bn (£9bn) acquisition of Wintershall Dea’s upstream assets and European carbon capture and storage licences. Another notable transaction in the upstream sector was the $4.9bn (£3.9bn) acquisition of Neptune Energy Group Limited by Eni and Vår Energi.

Drew Stevenson, Leader of Industry for Energy, Utilities and Resources at PwC UK said:

“The headline deal values for the UK mirror the global trend we saw in 2023, particularly in the US, with a wave of large upstream transactions driven by objectives around consolidating activity in particular regions and portfolio optimisation. We expect this to continue in 2024, with objectives particularly around capital allocation decisions and the balance of portfolios.

“Whilst the large upstream deals announced dominate the headlines, EU&R deals have been resilient, with a large number of smaller deals, particularly in the energy services space and in energy transition. The UK’s objective to be net zero by 2050 requires a wholesale transformation of the way in which all sectors operate, and is driving an investment requirement estimated at £50bn of primary capital every year, equivalent to over 2% of GDP. 

“This makes it arguably the largest, longest term and most fundamental demand signal in the history of market economics."

Matt Alabaster, Energy, Utilities and Resources Deals Leader at PwC UK, added:

“It’s no surprise that the investment community is raising and deploying record sums of capital into the businesses and projects that will decarbonise all sectors of the economy, from power and utilities to transport, buildings and industry. The largest UK deal in the energy transition space last year was KKR’s £1.3bn announced offer for SMS plc, a smart meter business with growing capabilities in battery storage and carbon reduction. 

“Of course, energy transition investments are not straightforward; not all opportunities are commercially viable, and many good opportunities will not get the investment they deserve. In particular, M&A in the UK is weighted towards established and mature businesses that represent lower-risk investments, rather than the early-stage businesses that need capital to commercialise new solutions and make them cost competitive.

“We estimate that around 45% of the decarbonisation needed in the UK will have to come from technologies that are not yet commercially mature. The investment community's biggest challenge and opportunity is not backing technologies that are already proven at scale, but accelerating the commercialisation and scaling of solutions that are not yet commercially mature.

“Looking forward, sectors we expect to remain lively for M&A activity include energy storage, network infrastructure and transport decarbonisation, as well as in areas such as building decarbonisation and energy services businesses. PwC’s recent UK Energy Survey found that only 19% of UK organisations said they had achieved significant success in managing energy costs, showing that there is a real opportunity for businesses that can provide the skills, solutions and capital needed to help organisations manage their energy usage better.”

Deals environment stabilising as appetite remains

In general, UK M&A activity in 2023 fell below the levels seen the previous year, as economic headwinds continued to affect the number of deals completed in the year. However, activity rates for 2023 were still at pre-pandemic levels and as economic conditions ease, confidence is expected to return to the market.

In total, the UK saw 3,628 deals across 2023, compared to 4,362 the previous year, a 17% decline. The volume of activity in H2 2023 was the second-lowest in the last five years, next to the first half of 2020, which was affected by a slump in dealmaking early in the pandemic. There was a total of £46bn worth of UK deals in H2 2023 compared to £42bn in H1, bringing the total deal value for the year to £88bn. However, full year deal value in 2023 was down 41% compared to almost £150bn in 2022.

PwC’s Global M&A Industry Trends is a semi-annual analysis of global deals activity across six industries — consumer markets (CM), energy, utilities and resources (EU&R), financial services (FS), health industries (HI), industrial manufacturing and automotive (IM&A), and technology, media and telecommunications (TMT). We have based our commentary on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by the London Stock Exchange Group (LSEG) as of 31 December 2023 and as accessed on 3 January 2024. This has been supplemented by additional information from Preqin, S&P Capital IQ and our independent research. Certain adjustments have been made to the source information to align with PwC’s industry mapping.

UK M&A values were converted to GBP using the GBP/USD 2023 average rate of 1.244