Angela Blake and Ashley White comment in Lexpert's special edition on Finance and M&A on why dealmaking will likely rebound this year, despite uncertainty about when central banks will lower rates.
Angela says that despite some macro headwinds, there are bright spots in M&A in sectors such as utilities, energy and mining, especially critical minerals and clean energy.
"Blake gives several reasons for optimism, including the stabilization of interest rates and inflation numbers, so dealmakers are more comfortable about the environment in which they are working; more growth in private credit-backed transactions; ongoing interest in renewables, energy, and resources; and the potential increase in restructuring and distressed M&A opportunities in a post-COVID world.
“We have a lot of people that have been sitting on the sidelines for a long time,” Blake adds, with “a lot of capital” to deploy. “I think 2024 will be an improvement over last year.”"
Ashley says that while the deal count in 2023 was slower overall, M&A in utilities and the oil and gas sectors picked up in Q3 and Q4. She anticipates a relatively slow start to 2024 but gaining momentum as the year progresses.
"White notes that “several traditional oil and gas companies are experiencing increased cash flows—that gives them more opportunity to develop strategies, including using M&A to deal with the coming energy transformation.”
White anticipates that consolidation will continue, with small and mid-cap companies the likely targets for strategic acquirers and investors in 2024, particularly in light of ample fossil fuel reserves, high commodity prices, and improving market access.
She also says that M&A activity in the sector will continue to balance investments for both efficiency and decarbonization.
White says there are also significant opportunities for M&A in the renewable energy space, with increasing foreign interest in Canadian projects. She adds there may also be cross-sector transactions related to renewable energy, with Original Equipment Manufacturers looking to secure critical minerals needed for battery production and energy storage and continued interest in hydrogen and ammonia as well as wind and solar projects."