While pressure from rising interest rates, recession fears and increasing regulatory scrutiny contributed to a year-on-year decline in global merger and acquisitions activity in most sectors during 2023, the energy sector defied the trend, with total valuations surging to their highest level since 2016.
According to PitchBook’s annual Global M&A Report, the energy sector concluded the year with a total of 1135 deals, amounting to $381bn, an 8.2 per cent increase year-on-year. Moreover, median deal size reached a significant high of $109mn, an 11.8 per cent increase from the $97.5mn recorded in 2022 and a substantial 39.7 per cent rise from the $78mn reported in 2021.
The sector’s performance in 2023 was fuelled by robust deal-making activity during the latter half of the year, culminating in a record-breaking fourth quarter. Notably, four out of the sector’s five largest deals occurred during this period, including two oil and gas mega deals in the US, which became the largest transactions of the year across all sectors.
In October, Chevron purchased Hess Corp in a $53bn all-stock deal and, two weeks earlier, ExxonMobil acquired Pioneer Natural Resources for nearly $60bn.
A decline in prime drilling sites and increasing investor pressure on oil and gas producers to shift their focus toward cash returns instead of drilling new wells have made acquisitions a major growth strategy in the US oil and gas industry. This is a trend that analysts expect will continue throughout 2024.
In contrast to the movements in the energy sector, technology M&A struggled. Activity fell by 24 per cent to 5883 deals, and transaction values plunged by 45 per cent to $454bn. Slowing demand for digitalisation, depressed valuations and a regulatory crackdown on big tech all contributed to the deal-making slump.
Meanwhile, a challenging macroeconomic environment, coupled with the collapse of Silicon Valley Bank and the emergency rescue of Credit Suisse, significantly contributed to investor caution in financial services M&A. Deal values declined for the second consecutive year, totalling 2771 deals worth $319bn, representing a 17 per cent decrease.
