14 June 2012
Rödl & Partner
M&A activity in the Renewable Energy sector is set to increase / Most deals are expected to take the form of strategic acquisitions
London/Munich - The renewable energy space is expected to see a high level of M&A activity in the next 12 months despite changes to government incentive schemes in Europe and regulatory uncertainty in the United States, according to the third edition of M&A in Renewable Energy – Global Outlook 2012. The report, published by Rödl & Partner in association with mergermarket , draws from interviews with 100 renewable energy M&A professionals from the corporate, private equity and investment banking communities to examine the challenges, opportunities and underlying deal drivers in the sector.
The wind and photovoltaic (PV) subsectors are expected to experience the most significant M&A activity, and respondents believe both wind and PV will achieve grid parity as early as 2015 or 2016 in Germany, Italy and Spain.
As far as specific geographies are concerned, 46% of respondents expect the highest levels of M&A to come from the Asia-Pacific region, followed by Europe and North America. The experts frequently note rising demand and a desire for energy independence as important motivations for renewable energy development in emerging markets.
Respondents expect government support (76%) and cash-rich corporate buyers (47%) to be the most significant external drivers of M&A in the next 12 months. The top internal drivers include an acquirers’ appetite for new technology (72%) and their desire to grow market share (62%), followed by attractively low valuations.
Recent M&A data shows the renewable energy sector has proved remarkably resilient despite eurozone volatility, constrained bank lending and changes to government incentive programmes. In 2011 the sector saw 210 deals worth €25bn, representing a 135% increase in value and a modest 2% increase in volume against 2010.
Additional findings in the report include:
• 47% of respondents expect special purpose vehicles (SPVs) to be the most widely used deal structure.
• Access to financing will present the largest obstacle to dealmaking, say 49% of respondents.
• 84% of respondents believe PE buyouts will increase over the coming year in the sector, up from 55% in 2011.
• Trade sales will comprise the primary route to exit from PE portfolio companies, say 54% of respondents.
Click here to download the full report: www.roedl.de/energie2012
Oliver Schmitt, Rödl & Partner Munich, says:
"It is a clear trend for 2012 that renewable energy companies will continue to remain a dominant factor in the M&A market. This is partly due to the consolidation of this market, where smaller players will be absorbed by larger competitors. Furthermore, PE funds and pension funds are aware that renewable energy projects and parks may provide quite high yields on their investment compared to traditional investments in other sectors."
Georg Abegg, Rödl & Partner Madrid, says:
"Spain and the other South European countries remain attractive for investors, especially for those active in the solar sector. In numerous regions, due to high amounts of sunshine and decreasing production costs, energy supply at market prices is already theoretically possible. Grid parity, supported by better efficiency and further reductions in plant and system costs, could soon stimulate a new wave of investments in the sector."
Roberto Pera, Rödl & Partner Rome, says:
"The legislative uncertainty in Italy has brought the market to a stop for new project developments, but the real M&A market, meaning the sale and purchase of existing power plants, has become an increasingly attractive investment option. US and German investment funds as well as private investors have been particularly active buyers."
Ulrike Brückner, Rödl & Partner Berlin/Johannesburg, says:
"The recent introduction of supportive programmes by several African governments, particularly in South Africa, will promote the establishment of a private sector in the respective markets. The enormous size of many of the projects will lead to an increase in transactions in the sector."
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About Rödl & Partner:
As one of the leading professional services firms in the field of renewables, Rödl & Partner has decades of experience in advising the full spectrum of interested parties – from utilities in Germany to project developers in India, engineering groups in Brazil and investment funds in USA. Our thorough and practical knowledge of the renewables markets ensures that our clients get the best return from their opportunities and have the right answers to proceed – anytime and anywhere in the world. With more than 3,000 people in over 80 locations we are by your side as dynamic and reliable partners in all of the world’s major markets.
London/Munich, 14 June 2012
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