Last gasps of M&A ‘gold rush’ alive in clean energy sector

After the “gold rush” for M&A insurance cover in 2022, this year may tell a very different story, according to Rowan Bamford, president of Liberty Global Transaction Solutions (GTS).

He was speaking as part of an Intelligent Insurer panel titled “M&A trends in re/insurance in 2023”, with fellow speaker Eva-Maria Barbosa, partner at law firm Clyde & Co.

Bamford said that the 2022 “gold rush” for M&A insurance had happened in every sector, with deals across the border and across every jurisdiction.

“If I had to say which jurisdiction was the strongest and had the greatest flow, it was the US.”

The US market accounted for more than 60 percent of the Liberty GTS book, which historically sat at about 45 percent, he said, indicating a big jump.

Healthcare was flagged as another sector with a strong flow of insurance submissions in 2022, particularly in the US. Bamford commented: “Institutional investors like it because we all need it. It’s not a fashion or a fad—it’s going to be around forever. So they’re able to model the returns quite easily.”

The gold rush occurred because “there was a lot of capital looking to be deployed”, he said.

“But now is a different story,” he added.

“From quarter four last year, through to the present day, funding is less easily available. To state the obvious: interest rates are at a record high, so valuations have come down. There is a disconnect between seller and buyer, so there’s more caution in the market, deals are going more slowly.

“I’m unhappy on one hand, because my submission slows down. But I’m also happy because my worries about people going ahead at breakneck speed and not taking care have all gone away.”

One sector where M&A insurance demand has remained strong is in energy transition, Bamford said. “It is a very hot topic at the moment and lots of institutions want to get into that space. We were seeing a lot of renewable energy, carbon sequestration, hydroelectric—all these types of energy deals were on the market and continued to be so.”

A big year

Looking at M&A deals in the re/insurance sector itself, Barbosa echoed Bamford in terms of 2022 being a record year for re/insurance unions.

These deals could be allocated to the first half of the year, with activity dropping off in the second half in the same way as for many other sectors.

“As Rowan pointed out, the US was the busiest—they were up by almost 50 deals last year compared to 2021.”

One of the biggest insurance M&As was in the first half of 2022 when private equity (PE) firm Carlyle Group bought NSM Insurance Group from White Mountains Insurance Group, with NSM valued at $1.775 billion.

Drivers for M&A within the re/insurance industry were “pretty much the same” as for deals in other sectors, Barbosa said.

“Drivers are inflation and the very difficult geopolitical situation, in particular, in Europe, which has been in decline for the second year. It is trade tensions. When you look at bigger transactions you need to find out how that’s going to develop.”

The big PE funds are sitting with the money waiting for financing for the interest rate development, she said.

“Despite the fact that we’re quite a particular industry, there’s not much difference from other sectors in what drove the dip in the second half of the year,” she concluded.

For more on M&A trends, how crypto fits into the picture and how much more tolerance the market has for capacity, watch the full discussion above.

You can also read the sister article titled  “ESG a ‘make or break’ factor in M&A in 2023”