A recent survey by Merger Market, a UK-based independent mergers and acquisitions intelligence service, for German independent professional services firm Rödl & Partner has found that renewable energy deal-making has withstood the difficult conditions of the last 18 months.

Dr Marcus Felsner, Rödl & Partner, Germany

Our survey garnered the opinions of 100 senior mergers and acquisitions (M&A) practitioners across the globe who are directly involved in the renewable energy sector and collected their views on the market’s key challenges and opportunities, as well as the M&A outlook over the coming year.

The comprehensive overview of the renewable M&A market found that 2009 saw 228 deals announced worth a collective €49.7 billion ($68.1 billion) – a deal volume that mirrors the level of activity at the height of the M&A boom in 2007 – and that the first two quarters of 2010 have also seen a brisk deal flow.

The renewables industry has proven to be a major driver for global economic growth. The increase in deal-making across the globe is a solid indicator for the continuation of high transaction activity in the coming years. Even in the light of reduced feed-in tariffs in important markets like France, Germany, Italy and Spain, investments in renewable energy continue to be highly attractive.

Casting an eye over the broader M&A market, the past 18 months have proved a very challenging time for deal-makers across all industries. The lack of market visibility coupled with an austere debt financing environment has affected the aspirations of many would-be acquirers.

Some firms in the clean tech space are also continuing to face difficulties financing day-to-day operations, representing an opportunity for cash-rich investors who can fill the financing void. Compared with other industry sectors, banks have been relatively willing to finance transactions in the renewable energy sector, underpinned by stable income streams and government involvement.

Government support is viewed as the principal external factor that will drive M&A over the next 12 months by 84 per cent of respondents. Fifty-five per cent see tax breaks as the most effective policy in driving renewables investment, while 44 per cent cite feed-in tariffs, and 26 per cent point to capital grants. But it is telling that 70 per cent note that accessing finance has been the most significant obstacle to deal-making in the space.

Robust deal-making

Despite these challenges renewable energy M&A remains relatively robust. Clearly, the fundamentals of the renewable energy sector are strong, borne out by the expectation of 78 per cent of respondents that M&A activity will increase over the coming 12 months.

Wind power is identified as the niche poised to see the greatest uptick in M&A, with 83 per cent of respondents expecting the sub-sector to experience significant M&A activity in the next year. In addition, 73 per cent see wind as the most probable destination for private equity funding. The solar thermal sub-sector is also expected to attract deals, with two thirds of respondents seeing it as among the most active renewable niches for M&A in the year ahead.

While government initiatives continue to drive investment in renewable energy, the market is continuing to mature, slowly edging towards parity with traditional energy sources. Forty-one per cent of respondents expect utility companies to be very active acquirers of assets going forward, suggesting buy-side interest is no longer dominated by niche investors.

Survey respondents shared their views on the likely purchasers in M&A deals in renewables

Pure play activity will also continue, while 67 per cent of respondents expect private equity investment to increase in the coming months. Just one tenth of respondents expect IPOs of renewables firms to decrease in the year ahead – 9 per cent expect a slight fall and 1 per cent a substantial drop.

In terms of the geographic breakdown of activity, the European and North American markets have continued to dominate, accounting for 74 per cent of overall deal flow since the beginning of 2005. Europe is identified as the region likely to witness the greatest renewable M&A activity in the coming year, with 80 per cent expecting Europe to witness significant activity and 45 per cent seeing it as the region that will host the most activity globally.

Respondents picked markets in Western Europe – France, Germany, Denmark, Italy and Spain – as likely to form the principal hubs of activity because of public awareness of climate change and government support for the sector. European and North American stock exchanges are tipped to be the main locations for listings by 56 per cent of respondents expecting an increase in IPO activity. Just 19 per cent expect Asia-Pacific stock exchanges to lead listings activity.


Renewable energy in Italy is slowly but surely edging towards grid parity with traditional energy sources; the European Photovoltaic Industry Association forecasts solar photovoltaics (PVs) parity by 2010 in certain parts of southern Italy. But investment flows in the Italian renewable energy space are still subsidy-driven with the Italian ministry for economic development recently moving to confirm its commitment to feed-in tariffs up to 2013.

While the new tariffs for 2012 and 2013 represent a per annum fall of 6 per cent from August–December 2011 rates, the reduction was not as severe as expected given the wider cuts slated in the government’s controversial €25 billion austerity package.

Looking ahead, the revised feed-in tariffs should ultimately have a positive impact on overall investment levels in the sector. Renewable energy in Italy remains an attractive investment location, having witnessed a total of 17 M&A transactions since the beginning of 2009, worth a collective €346 million.

In terms of market size, the Italian renewable energy sector lags behind those in European economies such as Germany and Spain. The domestic market is still in its infancy with most players lacking scale: nearly 75 per cent of overall M&A activity in the sector since 2005 has been deals worth less than €50 million.

Such a lack of scale means buy-side interest generally comes from financial investors looking to acquire early-stage development projects from turnkey constructors, with a trend that is seeing acquirers increasingly target PV assets. Large groups have generally shied away from brokering deals, although it is likely such players will become increasingly active as the market continues to mature.

Foreign firms are also eyeing domestic assets. While interest remains robust from countries such as Germany, the UK and the US, Asia-based firms are rapidly emerging. Signs are appearing that regional players are looking at direct investment opportunities in Italy. It remains to be seen whether this interest will translate into future announced activity, but it is clear renewable energy in Italy will continue to offer attractive plays for various would-be acquirers over the short to medium term.


Alongside Germany, Spain leads the way in Europe in terms of total capacity from wind and solar energy. Moreover, Spain is one of the first markets where electricity generation through renewable sources is approaching grid parity with traditional forms of energy, although this trend needs to continue apace if Spain is to meet its target of renewable energy accounting for more than 20 per cent of total energy generation by 2020. As the figure for 2009 stood at 12.5 per cent, the key discussion going forward will no doubt be around the advancement and regulation of renewable energy production.

There is certainly significant potential for solar electricity in Spain with the cost of production continuing to decline, to around €0.25/kWh in recent times. There is also scope for it to sell solar electricity to other European countries such as Germany and France, although a marked increase in capacity would need to be supported by better power links and grid connections. The first Spanish PV plants are now on grid parity, prompting a shift in the fundamental financing model, with the government continuing to cut feed-in tariffs and other incentives.

Spain has recently seen a relative spurt in renewables deal-making with 39 deals announced since 2009, carrying an aggregate disclosed value of €5.7 billion, outstripped pre-financial crisis activity, when 72 transactions were brokered from 2005 to 2008.

Europe was picked as the most likely location for M&A deals in renewables over the coming months

Looking at the sub-sector breakdown of announced activity so far in 2010, deal-making has largely centred in the solar space. In terms of future buy-side interest, larger trade and financial investors will likely continue to target assets in the PV niche. A number of smaller specialist firms already operate in a sector that is arguably ripe for consolidation with the market continuing to mature and develop.

As scale, technological know-how and a low cost base become increasingly important, there is scope for private equity houses and investment funds to act as consolidators, building an attractive portfolio of PV assets with a view to ultimately exiting to an established pure-play or utility group.

Outside of solar PV, it is notable that wind energy also continues to move towards parity, reinforced by significant investment flows. Despite this, the solar PV area remains most advanced and, given their relatively low (overall) associated costs, such assets are set to be most aggressively targeted by investors over the coming months.


France has typically focused on nuclear power to meet its domestic energy needs, although the government clearly recognizes the need to diversify and embrace renewable energy sources.

France has witnessed 34 renewable energy-related M&A deals since 2005, worth a collective €2.7 billion. In stark contrast, the Spanish market, for example, has seen 111 announced transactions carrying aggregate disclosed valuations of €25.1 billion over the same timeframe.

The French government aims for renewable energy to account for more than 20 per cent of the country’s total energy consumption by 2020 – which, given that the corresponding figure in 2005 stood at 10.3 per cent, appears to be an optimistic target.

If such levels are to be reached, the movement towards renewable energy sources needs to continue apace in the coming years. The dynamics of the market have, in fact, become more favourable recently due to new legislation that has established improved feed-in tariffs.

France’s incentive schemes are now at least comparable to those in other European countries. While the feed-in tariff for wind energy remains unchanged, tariffs for other sources such as biomass and building-integrated PVs have all been increased. Solar PV tariffs in France are now among the world’s highest. Improved incentive schemes will undoubtedly boost buy-side interest in the sector from both corporate and financial investors, acting as the principal driver of M&A going forward.

Casting an eye over the biomass space, wood-based fuels have significant potential in France. According to data from the European Environment Agency, France has nearly 13 million hectares of forestry land suitable for biomass fuels, a figure surpassed in Europe only by Sweden and Finland.

Looking ahead, 2010 will continue to see some investment in the French renewable energy sector, although activity should markedly rise in subsequent years. The reasons for this are twofold. Firstly, the debt financing environment remains challenging and it will take investors time to respond to the new feed-in tariffs and develop projects accordingly.

But, regardless of this short-term brake on deal-making, robust fundamentals are in place and, after years of relative underinvestment, the French renewable energy sector seems to be finally emerging from the shadows of its European neighbours.


Emerging markets and countries in South America and Asia-Pacific are beginning to attract a degree of investment. Brazil is one of the markets where renewable energy investment has climbed. The first half of 2010 saw 11 deals worth €1.5 billion in the Brazilian renewable energy sector, broadly comparable to the 14 deals worth €1.9 billion that came to the market at the height of the global M&A boom in 2007.

The survey identified wind power as the niche poised for the greatest rise in M&A activity over the next 12 months, and also as the top target for private equity funding

Although Brazil generates a significant amount of its electricity through hydropower, investment has centred in the bio-energy sector. In terms of financing, Banco Nacional de Desenvolvimento Econômico e Social (BNDES), the state development bank, will continue to play an important role going forward. As a provider of long-term credit, BNDES has continued to lend throughout the global financial crisis, promoting investment in Brazilian industry and infrastructure projects, as well as the renewable energy space.


Asian markets such as Vietnam and Laos are attracting increasing attention but, unsurprisingly, the key growth market is China, with domestic firms fast becoming major developers, producers and exporters of solar modules, challenging the dominance of European and US players.

The recent decline in the price of PV panels has left some companies operating in the niche vulnerable, particularly in Spain and Germany, but the Chinese sector remains in its infancy and it is unclear whether cash-rich Chinese firms will look to take advantage of market developments and broker outbound acquisitions in the coming year.

The wider PV market is ripe for consolidation as scale and a global presence become more and more important. The fundamentals of the Chinese renewable energy sector itself are also attractive, with the government showing a commitment to promoting investment in the sector.

Yet it remains difficult for foreign investors to enter the Chinese market, as feed-in tariffs are yet to be established – which is reflected in 76 per cent of announced renewable deals in Greater China since 2007 being intra-regional.

Czech Republic

In Central and Eastern Europe, the Czech Republic has been a frontrunner in renewable energy investment in recent years thanks to a generous feed-in tariff structure. Buy-side interest in the Czech Republic remains strong and the country is among the more mature renewable energy markets in Central and Eastern Europe. Impending cuts in feed-in tariffs, designed to ward off the sort of bubble produced in the Spanish PV market, may act as a brake on investment activity in the space going forward, however.

United States

Remarkably, the USA could also perhaps be considered as an emerging market for renewable energy investment. Although it has witnessed several significant M&A deals in recent times, the market is set to see a pronounced uptick in activity over the next couple of years. This will largely be driven by new government initiatives with the Obama administration likely to continue to introduce tax breaks and other incentive schemes.

It remains to be seen whether renewable energy can provide viable solutions to problems such as the ageing electricity grid system, but the focus on clean and renewable energy sources is arguably greater than ever following the recent oil spill disaster in the Gulf of Mexico.

Bright future for renewable M&A

The future prospects for M&A in the renewable energy sector are undoubtedly favourable, both in traditional and emerging market hubs. Although government subsidies play a key role in the sector, the need for companies to achieve scale and a global presence are now more important than ever and will be key determinants of deal-making going forward.

The sector’s fundamental value is only set to rise as the pricing of renewables sources reaches parity with traditional fossil fuel sources, which is likely to ensure that the boom of recent years is sustainable. Investment is likely to increase as the space become more attractive to traditional utility companies, industrials groups and large private equity funds.

Dr Marcus Felsner is a partner of Rödl & Partner, the Nuremberg-based professional services firm. For more information visit www.roedel.com. More information on Merger Market, a UK-based independent mergers and acquisitions intelligence service, can be found at www.mergermarket.com.

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