Can M&A power the energy transition while creating value?
Bold choices are required to future-proof our economy, society and environment at a time of escalating energy demands from the rise of electrification and the AI-led revolution.
Australia faces critical decisions on multiple fronts. Alongside an ageing population, healthcare challenges, cost-of-living pressures, and national security considerations, the energy transition remains a key national priority.
Bold choices are required to future-proof our economy, society and environment at a time of escalating energy demands from the rise of electrification and the AI-led revolution. Those of us immersed in the world of mergers and acquisitions (M&A) often wax lyrical about the significance of orchestrating large deals to “create value”, but what does that really mean?
From the CFO and deal-maker perspective, it requires consideration of how energy transition- led M&A affects profitability and sharpens capital allocation decisions. More broadly, it also means asking what role M&A plays in driving Australia’s energy transition in an increasingly complex and competitive global economy.
The answers to these questions look different now than they did at the beginning of the year, with recent environmental law reforms and a new 2035 emissions reduction target providing more energy policy certainty and direction.
Can M&A create value and change?
With policy frameworks in place, driving value by attracting the investment needed to power the transition, while also producing returns in line with capital allocation strategies, requires consideration of these emerging themes.
Collaboration is the new normal.
To meet Australia’s 82 per cent National Energy Market (NEM) renewables target by 2030, ~6GW of new renewable capacity is needed annually, alongside more than ~4,500km of new transmission lines.
The sheer scale of the task at hand adds a layer of complexity when considering competing national priorities, the requirement to replace ageing coal assets with firmed renewables, and a new AI dynamic.
Given the scale of capital required, we are entering a phase where alliances and co-investment will need to become standard practice in order to deliver large-scale infrastructure and the technologies necessary to balance energy supply and demand.
According to Deloitte’s 2025 Heads of M&A survey of the deal making ecosystem, 54 per cent of respondents expressed an interest in alliances, partnerships and joint ventures over traditional acquisitions.
Recent transaction activity also indicates a continuation of partial stake sales by asset owners with long-tailed development pipelines, as well as smaller operators who are capital constrained. This dynamic will enhance the appeal of alternate deal structures.
Elsewhere, further collaboration between the public and private sectors is also required. While the security of our critical infrastructure is non-negotiable, clarity on Australia’s approach to evaluating M&A transactions involving foreign entities would be welcomed.
This is because firming-capacity imperatives, combined with evolving foreign policy, may attract new entrants to Australia seeking to invest in projects, particularly if those projects align with their existing assets.
More clarity could steer more global investment flows and expertise to accelerate growth and skills development, helping train the workforce of the future.
Capital recycling opportunities have multiple drivers.
Given significant foreign ownership of our transmission, distribution and generation assets, the right balance of monitoring and oversight is required.
In addition to changes to tax rules and portfolio rebalancing considerations driving partial selldowns by foreign infrastructure investors, we anticipate that certain international investors may reassess their Australian portfolio due to cost of capital constraints.
The scale of ongoing investment needed to support the transition is also likely to drive transactions between infrastructure investors, allowing them to share the funding burden for growth and free up capital for emerging technologies.
Strong competition in some pockets will boost deal activity. For example, the proliferation of companies offering solar deals will almost certainly result in sector consolidation for scale.
Within this context, it is important to keep in mind that the sellers’ market of the early 2020s is a distant memory. Higher construction costs are shifting the buy vs. build debate as the premium for new and midlife operating assets recalibrates.
Based on recently announced deals, it appears that the valuation gap between acquirers and sellers has narrowed, which bodes well for M&A activity.
Data centres are the backbone to future-proof our economy
Coupled with electrification, the current AI wave is creating unparalleled new demand for integrated, cost-efficient energy solutions at scale for data centres and the broader tech economy.
With supportive policy initiatives to drive infrastructure build out and Australia’s own geographic advantages, we are seeing an unfolding thematic with increasing power demand and catalysing renewable energy investment leading to a convergence of technology companies and infrastructure investors.
With securing sufficient energy now the single greatest roadblock to data centre development in Australia, partnerships between technology companies, energy generators and infrastructure investors will become more common.
The momentum will inevitably sit on the clean-energy side, with AI-driven tech company expansion requiring believable green credentials to maintain their social licence. As these alliances form, M&A and broader deal making will play a central role in channelling capital into the sector — but as valuations stretch amid the hype, capital allocation discipline must be maintained.
The year that is gone was one of regulatory rule setting. The year to come is where the rubber will really meet the road. Overall, we remain optimistic that Australia stays the course and market players remain co-ordinated to deliver an energy ecosystem that provides accessibility to affordable, reliable, clean and smart energy supply.
Marc Hofmann is Partner, M&A Transaction Services, at Deloitte Australia. Haider Ansari is a Senior Director, M&A Transaction Services, at Deloitte Australia.
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