Despite uncertainty in some parts of the market in 2023, many Harris Williams clients in energy, power, and infrastructure generated strong attention from investors, highlighting the continued attractiveness of high-quality, differentiated businesses with defensible market positions and resilient revenue.

Looking ahead, we’re encouraged by moderating inflation, a resilient labor market, a positive stock market trajectory, healthy company earnings, and stable interest rates. At the same time, we are closely watching macroeconomic conditions and potential market disruptions, including the upcoming U.S. election and ongoing global geopolitical conflicts. Read more about the trends impacting the overall market >

M&A to Intensify in 2024

Across energy, power, and infrastructure, several areas stand out for their substantial investor appeal and expected momentum in 2024, including utility infrastructure, renewables and distributed energy, environmental services, and engineering. These subsectors share long-term stability and growth supported by strong, secular tailwinds such as aging infrastructure, surging infrastructure funding initiatives, shifting environmental regulations, ever-increasing demand for electricity, and the ongoing energy transition.

Powering Reliable Energy

Utility infrastructure products and services are on investors’ radar due to an expanding need to upgrade, replace, and maintain substation and grid equipment. Because electrical infrastructure is vital to the expanding grid, businesses offering testing, repair, maintenance and protection and control solutions are especially attractive to buyers.

Systems Control exemplifies the opportunity to serve a critical component of the electrical infrastructure value chain. The company designs and manufactures customized, highly engineered control and relay panels and electrical substation control buildings supporting transmission and distribution assets for the utility industry. DMC Power is another leader in the space, offering connection systems for high voltage power infrastructure across transmission, distribution, substation, and industrial projects.

Renewable energy’s evolution is also driving M&A activity. Wind and solar operators are looking to minimize downtime and intermittence while maximizing supply and returns, creating higher demand for reliable operations and maintenance providers.

Essential, Fragmented, and Increasingly Relevant

The fragmented and recession-resilient engineering sector is another area benefiting from renewed investment in and focus on utility and infrastructure assets. Major trends like the U.S. infrastructure bill rollout, ongoing energy transition, and heightened focus on sustainability and resource efficiency are further bolstering investor participation in the segment.

As these dynamics persist, investors will continue to look for creative opportunities to deploy capital into sought-after engineering companies. A variety of recent Harris Williams client engagements highlight the sustained pace of M&A throughout engineering, including Apex Companies, Ardurra, and Tower Engineering. ENERCON is a great example as well, with a focus on engineering and environmental services for customers in power generation and delivery. With a historical focus on the nuclear market, ENERCON has strategically expanded its service capabilities into highly complementary segments to take advantage of compelling long-term tailwinds.

The Circular Economy Revolution

At the same time, the circular economy is transforming how we approach the production, procurement, and use of materials throughout the economy, propelling the growth of environmental services businesses that enable circular waste model strategies.

Waste Harmonics, for instance, is North America’s premier managed waste services provider. The company provides customers with waste and recycling management supported by differentiated customer service, transparent and consistent pricing, and innovative technology with unique data insights to better manage ESG programs. In addition to valuing these qualities, potential buyers were drawn to the waste services market, which is large, generally untethered to the economy, has limited seasonality, and features predictable and resilient revenue streams.

Looking Ahead

Going forward, we expect the broad appeal of our industry to intensify, driving long-term M&A activity across energy, power, and infrastructure. Major trends driving growth in the industry are set to continue: the renewables transition, large investments in a vast array of utilities and infrastructure assets, and the ever-increasing reliance of the economy on electricity.

The magnitude of these mega-trends and the combination of stability and growth they foster will continue to attract a variety of investor types, including private equity groups, strategic buyers, and infrastructure funds.

To discuss energy, power, and infrastructure M&A opportunities in detail, please contact our senior professionals.