Dealmakers remain cautious: Q3’24 M&A trends in ENRC

In the third quarter of 2024 (Q3 2024), the energy, natural resources, and chemicals (ENRC) sector faced growing energy demands driven by the rapid adoption of artificial intelligence (AI) tools. With data centers projected to double their electricity use by 2026 to support AI activities, the industry must be prepared to handle new challenges and opportunities. Effective management of this energy demand requires collaboration between hyperscalers and utilities, focusing on AI query management, load balancing, real-time monitoring, data center optimization, and infrastructure planning.

In addition to the AI-related challenges and opportunities, the ENRC sector faced additional headwinds, including high interest rates, lower U.S. carbon compliance credit pricing, and rigorous regulatory scrutiny. These factors contributed to a cautious approach in the market. Nevertheless, deal volume experienced a slight uptick, increasing by 6.3 percent compared to the previous quarter. In contrast, deal value saw a significant decline, dropping by 36.3 percent.

Here are some key trends and insights from Q3 2024:

• The energy industry led the ENRC sector, accounting for 47 percent of deal volume and 65 percent of deal value. Consolidation and strategic partnerships among midstream companies aimed to optimize operations and enhance efficiencies.
• Renewable energy saw strategic acquisitions driving innovation and expansion in solar and geothermal to meet diverse consumer needs and adapt to evolving regulations.
• Power and utilities focused on M&A and investments to support rising electricity demand from electric vehicle chargers and data centers.
• The chemical sector divested regional assets and targeted low-carbon tech to decarbonize and meet regulations.

Looking ahead, the market awaits clarity on the political and economic climate post-election. Clean energy is projected to double by 2030, driven by the Inflation Reduction Act, emphasizing green investments. However, tariffs on China's clean-tech sector could impact the market.

Download the full report to gain more insights on M&A trends in the ENRC sector and how KPMG can help you address the challenges and opportunities ahead.