2023 was another busy year for the Corporate Finance team at Johnston Carmichael with 36 transactions completed at a combined value of approximately £400m. Activity has continued at the start of 2024 with the announcement that Johnston Carmichael has advised the shareholders of Glacier Energy, a specialist provider of products, services, and engineered solutions for renewable and conventional energy markets, as part of their recent acquisition by Averroes Capital.

Whilst volumes were lower than 2022 this was against a more challenging macroeconomic backdrop with tighter interest rates and persistently high inflation for most of 2023. Another contributing factor is that transactions in general are taking longer to complete which reflects an increasing level of caution and scrutiny from buyers and investors.

Coupled with this additional scrutiny, the appraisal of energy-related acquisitions and investments requires more consideration of the longer-term strategic impacts of the transition to greener energy sources. Additional due diligence workstreams including a review of ESG policy and compliance are therefore becoming increasingly prevalent.

These trends are set to remain for the foreseeable future and looking forward several other key factors are likely to impact M&A activity in the remainder of 2024. 

Energy Transition

Climate change and the target of achieving net zero carbon emissions will continue to have a significant impact on the energy sector. Specifically, M&A activity will be driven by the growing appetite from companies and investors alike to establish themselves within the supply chain and increase their exposure to this longer-term growth opportunity by acquiring resources and capabilities to secure additional market share.

The North Sea is also leading the way in decommissioning activity with £21bn of expenditure forecast by the North Sea Transition Authority (NSTA) in the next decade. This is a lucrative opportunity with 70% of the work anticipated to go to domestic supply chain companies helping cement their position as part of the transition to net zero. One such company is Elemental Energies, a leading independent wells expert, that Johnston Carmichael is working closely with to achieve its ambitious growth plans including strategic acquisitions. 

Uncertain Political Backdrop

The looming UK general election will no doubt be an influencing factor on M&A activity during 2024. The expectation is that deal volumes may increase as the uncertainty associated with a potential change in government and energy policy will encourage buyers and sellers to act sooner rather than later. This will be tempered by those wishing to adopt a ‘wait and see’ policy, particularly in the period immediately prior to any election.

Technology

Technological innovation continues to be an area of focus across the energy sector as part of the solution to realise longer-term ambitions of materially reducing costs and enabling the transition to renewable energy sources.

Despite challenges around funding and varying levels of risk tolerance in respect of newer technologies, the appetite for M&A activity will likely continue for those companies with innovative solutions for maximising production, reducing the cost of operating/decommissioning, accelerating the energy transition and lowering emissions.

International Opportunities

Finally, the combination of surplus cash and favourable exchange rates will continue to fuel demand from international acquirers for UK based assets particularly from the US and Middle East.

Against this backdrop, we look forward to working closely with our clients in what should be a busy 2024 for M&A activity.

Get in touch 

For further advice or information, please contact Stefano Vincini or another member of our Corporate Finance team.