Ready, set, grow: Winning the M&A race for renewables developers

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As global capacity of renewable-energy sources increases rapidly in the effort to decarbonize power generation, acquisitions for renewables developers have been rising substantially and have become ever more central to the long-term goals of major players. As competition for deals increases, successful M&A has become more difficult to achieve.

Companies that aim to capture the most deal value in this new landscape must implement strong and disciplined processes to remain competitive. This calls for acquirers to create a renewables-focused M&A strategy that supports the overall corporate or business unit strategy, conduct thorough due diligence on targets that enables precise deal execution, and integrate the target with the acquirer after the deal in a manner that ensures business continuity.

Renewables M&A deals are on the rise

At least 175 global acquisitions of renewables developers have been announced since 2018, excluding asset transactions. This has been accompanied by a steep increase in total deal value, primarily due to an increase in average deal value from approximately $150 million in 2018 to approximately $425 million in the first half of 2022.1 Despite significant market uncertainty in the first half of 2022, deal activity and renewables developer multiples have stayed high (Exhibit 1), reflecting a sustained appetite for acquisitions of renewables developers.2

1
Developers of global renewable-energy resources have increased their M&A activity in recent years even as multiples have stayed high.

The upward trend in M&A among renewables developers is occurring in multiple regions. Europe has experienced the highest deal activity globally in the past four years—with roughly 40 percent of deals involving a Europe-based target. North America is the second-largest market, with growth accelerating in 2022; there were 17 deals, representing nearly $6 billion in combined deal value. Asia–Pacific (APAC) and the rest of the world have also experienced growth, reaching a total deal value of $1.4 billion in the first half of 2022.

The acquirers have only just begun

Strong M&A activity has helped make renewables a highly contested field. The number of players active in renewables development and the diversity of the competition has increased significantly in recent years. Importantly, many competitors have shown that M&A is a core part of their strategy, albeit for different strategic reasons.

While independent renewables developers and utilities have acquired players primarily to increase their scale, add pipelines, and enter new markets, new entrants such as oil and gas (O&G) majors and financial institutions have pursued acquisitions to build capabilities and expand their value chain positions. There are more than a dozen large active acquirers among financial institutions, utilities, and independent renewables developers each, as well as a considerable number of acquirers that are not part of any of these types and a large share of the O&G majors.

Additionally, most of the industry players have publicly stated a strong appetite for accelerating their growth. Of the large players that have communicated gross installed renewables capacity targets, a significant majority aspire to at least triple their installed capacity between 2021 and 2030. According to company announcements, the top eight players have publicly revealed total combined capacity targets of more than 500 gigawatts (GW), up from approximately 110 GW of gross installed renewables capacity in 2021. Most of these players have also communicated clear capital allocation targets to support these aspirations.

Intense competition in the renewables landscape and the high ambitions of many of these players increase the likelihood that M&A will be necessary to achieve their targets. In addition, the advantages of M&A are becoming increasingly imperative. A strong cost position—accomplished by scale—and the commercial advantages of portfolios diversified across technologies and markets will increasingly serve as competitive differentiators. As a result, robust M&A activity appears to be here to stay for the foreseeable future.

There is some uncertainty in the M&A outlook due to various drivers: central banks engaging in monetary tightening; the push for energy security as a result of the Russia–Ukraine crisis; higher power prices; and market volatility. Ultimately, some of these drivers could be either headwinds or tailwinds for renewables developers. Even so, it appears likely that significant increases in M&A activity are on the horizon.

The value is there, but it’s rarely easy

As M&A competition makes it increasingly difficult to acquire the most strategically optimal renewables developer targets in a cost-efficient manner, standard deal flows will likely not suffice most players. However, it is still possible to create value through M&A using a structured approach that focuses efforts across several key areas (Exhibit 2).

2
A three-phase approach can help facilitate successful M&A processes for developers of renewable-energy sources.

Start with an M&A blueprint that supports the corporate or business unit strategy

Conducting a successful renewables developer acquisition is a complex process that requires more than generic deal execution capabilities. First, acquirers must clearly define why and where they need M&A to contribute to the objectives of the underlying corporate or business unit strategy. Then they must plan how to approach the deal by creating a high-level business case, valuation, and preliminary integration planning.

An M&A blueprint can help answer those questions and provide detailed and clear direction for companies to execute their strategy. The blueprint typically offers a perspective on the M&A themes (for example, increasing exposure to certain technologies or geographic footprints) that support the corporate or business unit strategy; it also usually provides guidance for target screening criteria, such as minimum ticket sizes and other boundary conditions (such as pipeline size).

Approach sourcing proactively to access targets early

Since the renewables developer market consists of many small, private companies, a proactive approach toward target screening and sourcing can pay off with advantaged access to deals. An outside-in screening of potential targets, market by market, is the starting point.

Acquirers should base target screening on two key elements: the strategic fit of the target with the acquirer and the current state of the pipeline and portfolio (because a developer acquisition can also include operational assets). It is crucial to assess intrinsic strengths, incorporating a view of the target’s development capabilities. Local market knowledge is vital to establish a view of the track record and capabilities of the target. Therefore, the acquirer’s local development teams should play a strong contributing role to the often central M&A function that performs the screening.

The target screening approach should be comprehensive and bottom-up—limited only by factors such as deal size minimums, as defined in the M&A blueprint—and will require significant sourcing efforts. Proactively engaging with targets will enhance the likelihood of being able to access them early and will aid in building trust-based relationships that provide a differentiator in competitive deals.

Create a deep strategic understanding of the target

Conducting detailed due diligence—including from commercial, financial, legal, and operational perspectives—is key to understanding the potential value of the platform and therefore being competitive in the bidding process without overpaying.

Commercial due diligence should aim to achieve a deep understanding of the future viability of the renewables target, its fit with the acquirer’s growth strategy, and potential synergies. This part of due diligence will require several components unique for renewables developer deals:

Spinning assets and assets under construction. Major challenges for the valuation of existing assets typically include the valuation of tail production and the assessment of operational or political risks. Thus, acquirers need to develop a perspective on potential future renewables penetration and corresponding capture prices in core markets, obtain insights on how potential competitors value assets in similar regions, and assess potential risks with local experts.

Pipeline. A thorough, bottom-up valuation of the pipeline of the target is essential for an accurate valuation. This is the case for onshore wind, offshore wind, and solar projects. While no clear universal system prevails in the industry, players should adopt their own standardized parameters in a simple framework that clusters the pipeline based on realization probabilities and time horizons. Other factors such as grid connection, building permits, and offtake agreements should be considered in both the realization probability and the potential value of the realized capacity.

Platform value, considering capabilities required in the future. A capability assessment of the target—ideally from the inside out, with high access to the targets—will inform the ability of the target to grow and evolve the business. Especially pertinent factors include development (for example, strong familiarity with local markets, management of the approval process, bidding capabilities, and sourcing strategy), financing, and commercialization capabilities. The outcome of the assessment should provide a clear view of gaps and areas of distinctiveness and can be overlaid with the capabilities of the acquirer’s own local organization as well as the capabilities of other local developers.

Value capture potential, including synergies. New capabilities, optimizing capital, and access to new geographies drive the majority of value capture potential. The starting point should be a synergy assessment with the target, encompassing the typical cost and organizational benefits with existing operations in the country. Some of the largest drivers of these synergies are the increased use of combined development teams, the combined pipeline’s scale advantage in development, and construction costs and overhead benefits. This approach identifies commercial synergies such as the ability to provide more-advanced power purchase agreements (PPA) products and integrated bids in auctions.

Ensure business continuity through value drivers and culture

During the integration planning process for each deal, acquirers should align value-capturing activities such as seamlessly continuing renewables development projects, upholding and expanding investor relations, and fostering bidding capabilities. Early buy-ins regarding acquisition targets and thorough preparation for day-one readiness can ensure business continuity after the deal to maintain momentum.

Moreover, acquirers must make a special effort to keep the cultural dimension from slipping under their radar. One aspect is leading by example in top positions, which can foster the understanding that a deal completion is not the end of a business but the beginning of a new and more innovative endeavor in the renewables ecosystem. Another aspect of culture is using aligned incentive schemes to retain key personnel who uphold day-to-day operations after the deal closes.


During the coming decade, we expect renewables developer M&A activity to grow at an even faster pace than in the past few years. This will likely lead to greater competition in the acquisition landscape, with players pursuing deals more aggressively to achieve their ambitious strategic goals. The already substantial challenge of creating value is poised to increase; however, given the crucial importance of renewables development in unlocking a historically unparalleled investment opportunity, players who get it right will have a highly attractive outlook.

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