Top sectors are ready to deal.
This year’s sector M&A outlook finds that external influences and future growth potential are driving appetite for dealmaking.
Read our full sector reports for more insights.
Automotive and transportation
- Collaborative product development, supply chain and production, based on predictive analytics, robotics and Internet of Things (IoT) technology, are driving innovation across the automotive value chain.
- Companies’ M&A strategies revolve around acquiring innovative capabilities offered by start-ups.
- The rise of the collaborative economy, where mobility providers offer services without owning vehicles, is leading to partnerships between traditional automotive vehicle manufacturers and new entrants.
- The sector is moving toward total connectivity between vehicles, traffic and municipal services through sensor-embedded roads and infrastructure — the move toward fully autonomous vehicles will impact automotive companies’ M&A strategy, with an increasing convergence with the technology sector.
- Original equipment manufacturers (OEMs) are increasingly adopting strategies to move away from diesel powertrains in the long run and focus on the production of hybrid and electric passenger vehicles. Diesel emission-related issues are leading OEMs to refocus on operational performance and consider restructuring measures.
Consumer products and retail
- Cross-border transactions are expected to increase as large regional companies look to move from being strong regional leaders to global competitors.
- Portfolio optimization will also be a major theme, with large European and North American conglomerates refining their portfolios to focus on core assets and category expansion.
- Unable to outflank start-up brands, big consumer companies are increasing M&A activity as a route to outsourcing innovation. Such moves gain access to e-commerce technology and insights into how consumers replenish products. A major facilitator of such deals is the increasing use of corporate venture capital by larger companies.
- Protein has been a key part of the health and wellness trend the last few years. Alternative protein source companies will be key acquisition targets as the world population continues to grow. Insect protein will join plant protein in becoming mainstream — although it poses an interesting marketing challenge.
Mining and metals
- During the price downturn, the mining industry was selling non-core assets to reduce debt and optimize balance sheets.
- The recovery of commodity prices has released the immediate pressure on companies to sell, and some have postponed divestments.
- Companies that have successfully managed balance sheets will be open to synergistic acquisitions.
- The challenge is balancing short- and long-term shareholder value, through revised dividend policies or through discerning allocation of limited available capital.
- Significant consolidation is anticipated as companies merge to strengthen against volatile conditions or position themselves better for the next cycle.
Oil and gas
- This will drive deal activity, especially for the upstream operators. Companies will want to dispose of non-core assets and acquire acreage in core areas.
- US shale has been a major area of M&A activity in the first quarter of 2017, and this is expected to continue, especially targeting assets in the Permian Basin.
- Faced with changing customer behavior, oilfield services companies are responding by embracing new technologies and contract models, fundamentally changing their business models and transforming their relationships with their customers.
- More fragmented than ever, the oilfield services industry is adapting to the new environment and is starting to consolidate as a response to the fundamental changes in its customer base.
- Oil and gas companies are keen to invest in digital technologies such as cloud-enabled mobility, big data-powered analytics and the Internet of Things.
Power and utilities
- Expansion in distributed generation, such as solar photovoltaic and battery storage, and new energy technologies, such as microgrids, and virtual power plants is disrupting traditional utility business models.
- Smart technology, telecommunications (telecom) and data analytics are being used to optimize energy delivery and enhance customer experiences. New entrants have begun to offer customers innovative, behind-themeter products and services. Utilities are also acquiring new capability through acquisitions or partnering with telecommunications and technology providers.
- Utilities in Europe are disposing of noncore assets to improve balance sheets, and diversifying into new markets and technologies to drive sustainable growth. Financial investors are keen to diversify operations and deploy capital to an increasingly competitive pool of power and utilities assets, resulting in currently high premiums for regulated network assets and sovereign power purchase agreement-backed renewables.
- Energy demand continues to increase in emerging markets. Significant investment is required to provide sufficient generation capacity, and associated grid infrastructure, to fuel economic growth. Foreign and private investors are rapidly increasing their exposure in such markets.
- Increasing convergence and competition with technology and media companies, combined with advances in technology and digitalization, are disrupting business models across the telecom landscape, leading to increasing combinations.
- Telecom companies (telcos) will grow their revenues in the digital landscape by capturing adjacent business options, including over-the-top, Internet of Things and machine-to-machine information and communications.
- Digital will demand higher capital expenditure for telcos as data consumption accelerates traffic on networks, leading to an evolution in the telecom infrastructure market, including small cells and data centers. Tower sale and leaseback transactions are also an important route to controlling capital expenditures and boosting network coverage.
- Telcos are also investing in incubator initiatives through their corporate venture arms to complement their M&A approach and gain a fast track on new innovation.