Deal makers remain cautious across the sector
Deal volume and value for the energy, natural resources, and chemicals (ENRC) sector in Q1’23 continued to decline quarter-over-quarter. This trend applied to both strategic and private equity (PE) deals, as well as all subsectors with the exception of deal value for chemicals.
Decarbonization was a key consideration for the sector. Oil and gas (O&G) companies and PE firms continued to divest their carbon-intensive assets and look for acquisitions that could improve their environmental profile. Power and utilities (P&U) remained focused on developing their zero-carbon electricity generation portfolios. Renewable energy players sought new opportunities through the Inflation Reduction Act (IRA) to accelerate the deployment of solar, wind, electrified transportation, energy storage, and carbon-capture projects.
In the chemicals industry, companies divested noncore assets and remained wary of undergoing big-ticket deals due to macroeconomic uncertainty and growing scrutiny involving antitrust regulations. Higher valuations and increases in the cost of debt also created barriers for investment.