The industry overview
M &A activity in the global energy and materials (GEM) sector remained muted in 2024. The number of deals increased about 12 percent, and deal value grew from $722 billion in 2022 to $808 billion in 2024, consistent with 2023 figures. Deal value in 2024 was still 14 percent lower than it was in 2021 (in nominal terms). The Americas region was the major driver of deal value, but Europe, the Middle East, and Africa (EMEA) gained ground, especially compared with activity in 2023. Companies are continuing to pursue smaller deals aimed at consolidation rather than large deals or other bold portfolio moves. Indeed, the watchword for energy and materials companies has been “caution,” given the run of elections around the world in 2024 and the impact of other geopolitical and macroeconomic factors.
Opportunities for 2025—and beyond
Despite ever-present uncertainties in the sector, we anticipate an increase in M&A activity among energy and materials companies in 2025. A range of factors suggests more deals are on the way. For instance, interest rates in Europe are expected to return to previous levels by 2027. Additionally, companies in this sector need to reshape their portfolios, and many have cash that they are seeking to invest. Also, private equity (PE) firms are continuing to accumulate substantial amounts of dry powder.
Our research shows that PE accounted for 16 percent of the total deal value in GEM in 2024, which was higher than in 2023 but still below the historical average of 20 percent between 2020 and 2022. Much of the PE activity has been focused on spinouts, suggesting that strategic players view PE funding as a catalyst for spinning out assets before they get to the point of being mature enough for a full-on acquisition.
Despite recent discussions about trade tariffs, our research shows that cross-regional deals are again becoming more important in energy and materials. In fact, they increased from 13 percent of total deal value in 2020 to 19 percent in 2024. We anticipate that companies in this sector will continue to focus on international deals in 2025, with some exceptions in specific subsectors.
Subsector activity
Across all four subsectors we analyzed—electric power and natural gas (EPNG), oil and gas, chemicals and agriculture, and materials—40 percent of the largest deals could be classified as consolidations. But the reasons for consolidation and M&A activity varied across subsectors, as did the areas of opportunity.
Deals in EPNG, for instance, shifted ownership to private investors. M&A activity in this subsector was also conservative because of the industry’s intrinsically higher input costs and lower wholesale power prices, all of which have historically served to thwart its momentum.
By contrast, transactions in the oil and gas sector were predominantly regional, with companies aiming to improve their cost positions. Chemicals and agriculture companies continued to focus on divesting noncore assets to streamline their portfolios. And in the materials sector, companies consolidated through transatlantic deals, with transactions in paper and packaging aimed at expanding into new geographies and product areas so companies could meet ever-shifting customer demands.
EPNG
Deal value in EPNG increased 40 percent in 2024 compared with 2023, with much of the M&A activity in this subsector focused on asset transfers and consolidation. There were some regional deals in the transmission and distribution segments—for example, Italgas’s acquisition of 2i Rete Gas for $5.8 billion will allow it to cover more than half of Italy’s gas volume. As noted previously, EPNG has faced several macroeconomic challenges; the uncertainty in this sector will continue because of higher input costs (capital expenditures) and lower projected wholesale power prices.
Despite the ongoing global transition to renewable energy, certain EPNG subsegments, such as offshore wind, haven’t performed as well as anticipated, prompting some smaller companies to exit the market. The risk/return profile simply wasn’t attractive enough for them to remain. However, that may change, and more may reenter the market, buoyed by delivery commitments from some of the larger EPNG companies. In 2024, the number of wind deals increased by 35 percent compared with 2023. And interest in renewables among large strategic players is expected to continue—along the lines of, for instance, Equinor’s acquisition of a minor stake in Ørsted and BP’s offshore-wind joint venture with JERA in late 2024.
The overall outlook for EPNG across the globe is generally positive, but the EPNG industry in Europe still may face some challenges. For instance, some forecasts suggest there will be a 15 percent decrease in energy demand in this region until 2050 because of a projected decline in the use of fossil fuels and an increase in the consumption of electricity. As a result, EPNG companies in Europe will need to explore alternative off-take options to stay competitive.
As mentioned previously, PE investors have taken on more ownership of EPNG assets over the past few years; in 2024, they demonstrated increased interest in renewable assets and related companies, such as equipment and service firms. We anticipate this interest will continue in 2025, as financial investors continue to diversify their portfolios, integrating advanced technologies and expanding their global reach through more EPNG deals. For their part, strategics will need to shape their M&A strategies—including programmatic M&A—to make the right moves in this environment.
Oil and gas
In 2024, oil and gas companies were focused on consolidating their portfolios and improving their cost positions. After heightened activity over the past several quarters, this subsector—which, in our analysis, also includes petrochemicals—has experienced a number of restructurings and closures, such as with various crackers in Europe. These and other industrial challenges have prompted some oil and gas companies to pursue deals that will allow them to move into new adjacencies and regions, with a focus on the United States (Permian Basin)—think of the recently closed upstream deal between ConocoPhillips and Marathon Oil and of Chesapeake Energy’s merger with Southwestern Energy, which allowed Chesapeake Energy to become the largest natural gas producer in the United States. M&A activity among oil and gas companies picked up in other regions as well, including in the North Sea.
Our analyses suggest oil and gas companies are likely to continue pursuing deals that can help them achieve sustainable growth—as was the case in ADNOC’s (Abu Dhabi National Oil Company) acquisition of Covestro —or create more value from waste streams and recycling technologies.
Chemicals and agriculture
In 2024, M&A deal value in the chemicals and agriculture subsector decreased by more than 25 percent compared with 2021, and the sharpest decline in acquisitions was in the Americas region (more than 50 percent). Interestingly, the locus of M&A activity shifted substantially: Most acquisitions were in the Asia–Pacific region (consistent with previous trends), and for the first time in five years, European acquirers outnumbered their American counterparts in value and volume.
Deals in this subsector were motivated by chemicals and agriculture companies’ desire to optimize portfolios, and they included carve-outs—such as Lanxess selling its urethane business to UBE—as well as acquisitions of assets that were under restructuring. For instance, DuPont’s announced split into three independent companies was notable in that the separation was designed to help the company achieve higher productivity and greater efficiency by remaking itself as a “diversified industrial company.”
Materials
Materials companies were also focused on consolidation in 2024—in some cases, through transatlantic deals. Challenging market conditions have prompted companies in this subsector to find ways to scale so they can better serve customers. (In our analysis, materials companies comprise businesses in paper and packaging, metals, engineering and construction, building materials, and mining.)
M&A activity by materials companies has been driven, in part, by the need to succeed with insourcing and vertical integration efforts, innovate new product and service offerings, and improve general and administrative operations. Examples of recent megamergers in paper and packaging include mergers between Smurfit Kappa and WestRock, International Paper and DS Smith, and Amcor and Berry Global.
Meanwhile, engineering and construction companies have historically used M&A to expand regionally or to specialize in certain product or service areas. Going forward, however, outsize growth may become the goal for companies in this subsector. Government infrastructure programs, such as the Infrastructure Investment and Jobs Act in the United States and the European Green Deal, may prompt more investments, and thus more opportunities, for engineering and construction companies. Other trends influencing M&A activity in this subsector include considerable housing shortages in the United States, the worldwide need for critical infrastructure upgrades for utilities and data centers, a growing need for more warehouses as global supply chains are decoupled, and falling interest rates in Europe and North America, which could further help boost investments in housing and infrastructure projects.
M&A activity among mining companies continued to trend upward, as it has since 2023, with an uptick in midsize and large deals. Chinese investors are likely to continue to show interest in mining companies, given their increased ownership in copper, lithium, and nickel mining over the past decade. And trends such as shifts to electrification and electric vehicles, as well as the energy transition, will continue to prompt even greater M&A activity in the mining segment—for example, Rio Tinto’s acquisition of Arcadium Lithium was designed to boost Rio Tinto’s position among providers of energy transition commodities.
The story is similar in the metals segment, where companies are using M&A to optimize their footprints and cost positions—for instance, targeting deals along the value chain or fostering long-term supplier partnerships. New entrants, such as those focused on green steel production, are steering the industry toward more innovation. M&A may be an effective way for these companies to scale quickly, secure the inputs and resources they need, and optimize costs.
Clearly, companies in global energy and materials are facing inevitable headwinds, with talk of trade tariffs and geopolitical uncertainty. But even amid these clouds, some bright spots are appearing: lower interest rates, the resolution of political elections, and lots of dry powder among investors. The signs point to more deal activity in 2025, not less.
