Infrastructure M&A remains robust despite COVID uncertainty

The energy transition and a growing need for efficient digital infrastructure are two trends fueling infrastructure dealmaking in 2020

In a year that has seen global M&A activity drop significantly, M&A within the infrastructure sector delivered a strong performance.

Total deal value of US$328.1 billion was recorded in the first three quarters of 2020, according to Inframation, an Acuris publication. This represented an impressive year-on-year increase of 54%. Deal volume also registered a healthy yearly increase, with a total of 1,013 transactions, up 10% compared to Q1-Q3 2019.

The third quarter of 2020 was particularly active: there were 379 transactions over the quarter, a 24% rise in volume on Q3 2019—while value more than doubled over the same period to US$162.1 billion.

This robust performance was at odds with global M&A dealmaking in the first nine months of the year, which fell 28% by value and 27% by volume year on year as ongoing COVID uncertainty put dealmaking plans on hold.

5G race drives Japanese telco M&A

The largest transaction of the year so far is Japanese telecoms firm Nippon Telegraph & Telephone (NTT)'s proposed buyout of its subsidiary NTT DoCoMo, valued at US$40.7 billion. The transaction, pending shareholder acceptance, would see NTT take private its listed subsidiary, buying out the 33.8% free float.

The deal will enable NTT to expand its 5G network as competition heats up in the sector, and as global players such as Amazon and Google increase their presence in the Japanese market. Government pressure to reduce costs within Japan’s telecoms industry has also been cited as a key motivation behind the deal. By completing the transaction, NTT may be able to push down prices, forcing others in the industry to follow its lead.

The NTT deal is one of the largest-ever domestic deals in Japan, and it has helped Asia achieve the largest annual increase in deal value of any region: a 127% increase on the same period in 2019 to reach a total deal value of US$76.7 billion. Volume rose by 79% to 154 transactions, mirroring a similarly strong performance in overall M&A activity across the region.

Fiber demand ticks up

The NTT deal demonstrates the strength of dealmaking in the telecoms infrastructure sector, which registered a total of 115 deals worth US$105.2 billion in the first three quarters of the year—a 58% increase in volume and a staggering 539% increase in value compared to the same period in 2019.

The sector also attracted the second-largest infrastructure deal of the year: the US$14.1 billion take-private of US communications infrastructure provider Zayo by investment firms EQT Partners and Digital Colony. “Zayo is ideally positioned to meaningfully expand its offerings and services against the backdrop of accelerating demand for innovative fiber infrastructure solutions”, Jan Vesely, Investment Advisor to EQT Infrastructure, said in a statement announcing the completion of the deal in March.

The outbreak of the COVID-19 pandemic resulted in an uptick in value for properly positioned fiber assets. Fiber-to-home providers around the world required immediate increases in capacity—and lit dark fiber or contracted for new capacity. This increase in residential demand was not offset by decreases in commercial demand, with revenues surging as a result for many businesses.

The impact on M&A activity on the sector was mixed, as buyers’ and sellers’ price expectations diverged over the past six months. This dislocation appears to be subsiding with a number of processes slotted to begin in early 2021.

Energy transition fuels dealmaking

Another significant infrastructure deal to take place in 2020 was the US$10.1 billion sale of a 49% stake in ADNOC Gas Pipelines to a group of investors led by Global Infrastructure Partners. The deal will help to support ADNOC’s smart growth strategy, to create a more sustainable and economic gas supply by 2030.

The renewables sector has also attracted dealmaker attention in 2020, as companies ramp up their efforts to reduce their carbon emissions. The value of deals within the renewables sector reached US$54.1 billion in Q1-Q3 2020, compared to US$35.4 billion in Q1-Q3 2019, while deal volume stayed relatively stable, dropping slightly from 441 to 435 deals, according to Inframation. KKR’s US$5 billion acquisition of UK recycling and renewable energy company Viridor is one such deal.

Another example of a 2020 deal motivated by the energy transition was the US$4.8 billion acquisition of Dutch utility company Eneco by a consortium led by Mitsubishi. The consortium reportedly beat competition from Shell and KKR to secure the privatization deal. Eneco’s focus on low-carbon energy projects and home energy services reportedly made it an attractive target.

“Eneco fits in perfectly with our current energy activities and provides us with a platform to further grow in the European market in which we intend to have a leading position in the energy transition,” Takehiko Kakiuchi, Chief Executive of Mitsubishi, said in a statement.


The enduring appeal of infrastructure assets meant that deals continued to close in 2020, despite the unprecedented global disruption caused by the pandemic.

In fact, the behavioral shifts that took place due to the pandemic are likely to encourage dealmaking in certain areas. The growing need for digital infrastructure is one such example, as demand to connect an increasingly fragmented global population grows. Meanwhile, the pandemic has accelerated the global effort to shift to less carbon-intensive energy sources, as companies come under increasing pressure from investors and activists to rebuild a more sustainable economy post-crisis.

From 5G to renewables, the pandemic served to accelerate trends already gathering pace within the infrastructure sector. Investment in infrastructure projects looks set to be a key focus for government stimulus packages aiming to rebuild global economies post-pandemic.

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