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West Monroe’s Research Reveals Bullish Outlook for Cleantech M&A

Survey highlights growing enthusiasm for cleantech fund investments and market potential

CHICAGO, June 22, 2023—West Monroe, a leading digital services firm, released its annual M&A signature research—this year concentrating on activity in the energy sector. The report analyzes survey responses from 200 private equity and corporate development executives on investment activity in the cleantech sector, finding that leaders are bullish about investment in renewables and environmental, social, and governance (ESG)-related funds both now and in the future. 

The top finding from the research shows that cleantech is no longer speculation, but a viable sector with executives bullish on M&A activities picking-up—75% of survey respondents said that recent developments in public policy and regulations around energy have amplified their appetite for M&A in the sector. 

“Cleantech has emerged from a niche infrastructure fund to an area where many investors are evaluating the themes and opportunities across each of their industry vertical teams that will benefit from the growth, tax advantages, and clean energy tailwinds,” said Keith Campbell, a senior partner in West Monroe’s M&A practice and co-author of the report.

Private equity investors are continuing to align their portfolios with ESG policy objectives, harnessing the sector's growth potential. As cleantech continues to gain traction, it is imperative for private equity leaders to swiftly position their investments to benefit from this decarbonization transformation.

Other top findings include: 

  • Investment opportunities are hot: Two-thirds of respondents indicate that they expect to make one to two cleantech acquisitions in the next 24 months, and only 20% indicated that their previous cleantech deal was their first. 
  • Regulations and policymaking are key drivers: Three in four (75%) reported that recent developments in public policy and energy regulations have increased their focus on cleantech investment. 
  • ESG M&A standards are coming: Over half of the respondents (54%) anticipate the establishment of uniform ESG disclosure standards related to M&A within the next two to five years. 
  • Financing is a challenge: Despite the appetite for deals, the most significant challenge hindering the growth of cleantech companies is the difficult financing environment with 22% of respondents ranking high borrowing costs as their primary concern.

“With significant investment already focused on large renewable energy assets and the anticipation of ESG standards impacting dealmaking, private equity investors are poised to capitalize on the growing potential in cleantech,” said Jeremy Klingel, senior partner in West Monroe’s energy & utilities practice and co-author of the report. 

As nations strive to decarbonize their energy mix and organizations commit to reducing greenhouse gas emissions across their supply chains, there is a generational opportunity emerging—and it requires strategic alignment across the public and private sectors to navigate policy, regulation, and incentives to unlock the full potential of the clean energy transition.

The report, titled “Preparing for the Next Wave of Cleantech Investment,” surveyed 200 private equity and corporate development executives with expertise in the energy space in Q1 2023. Half of respondents were based in the United States and half in Europe. All respondent organizations had acquired or sold at least one company in the cleantech space over the last three years and intend to acquire or sell at least one over the next three years. 

West Monroe is a market-leading advisor and longtime partner to the private equity industry, working regularly with 40 of the top 100 PE firms across the transaction lifecycle, from diligence to value creation to sale.

About West Monroe
West Monroe is a digital services firm that was born in technology but built for business—partnering with companies in transformative industries to deliver quantifiable financial value. We believe that digital is a mindset—not a project, a team, or a destination—and it’s something companies become, not something they do. That’s why we work in diverse, multidisciplinary teams that blend management consulting, digital design, and product engineering to move companies from traditional ways of working to digital operating models—and create experiences that transcend the digital and physical worlds. Connected by the 13 founding values that drive our culture, our 1,800 employees work collaboratively across the firm with the belief that our clients’ success is our success. Visit WestMonroe.com to learn more.

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