The Q1’22 downturn in ENRC M&As has continued into the second quarter, driven by the Russia-Ukraine conflict, energy market uncertainties, steep inflation, rising interest rates, and the chance of a global recession. Quarter over quarter (QoQ) deal volume was down 35.3 percent while deal value dropped 68.7 percent. This decline was pervasive, affecting all sub-sectors for both strategic and PE deals.
Despite these challenges, many investors in the ENRC sector remain optimistic. In the May 2022 KPMG Mid-Year CEO Survey of six major industries, respondents from the ENRC sector had the highest expectations that their M&A activity will increase over the next 12 months.
For the second half of 2022, KPMG deal professionals cite ESG factors such as the acquisition of green technology, the divestment of non-core assets, and digital transformation as key drivers for dealmaking this year. ENRC companies should keep a close watch on the continuing effects of tax law changes and proposals related to the Biden administration’s Build Back Better framework. Deal makers should also take a long-term, strategic approach to M&As involving rapidly changing energy companies and uncertain energy markets.