1. Introduction

Already 30 years ago, an empirical observation was made ^[1] that “over the past 20 years, the minimum company size required to compete successfully in most industry segments has been steadily increasing.” Within the content of this assertation is an assumption of growth being a key element for business success and prosperity. Two main paths lead to business growth—either companies grow internally by nurturing within-firm resources and internal investments or firms pursue an external growth strategy and proceed with acquiring other firms. Mergers and acquisitions (hereinafter M&As) may be defined as transactions between two independent companies when a company (merging company or acquirer) buys either part or the entire company from another company (merged company or acquired company). Even though concepts of merger and acquisition are often used interchangeably, they refer to different agreements and different modes of transactions. A merger occurs when two individual firms combine and turn into a single new company. Following this transaction, shares of each company are surrendered, and shares of a new company are issued instead. On the contrary, an acquisition occurs when a firm buys shares of another and becomes a legal shareholder of the acquired company. From the legal perspective, the acquired firm stops to exist. The bidder takes over the business of the acquired company. Finally, shares of the acquired company stop, while shares of the bidder continue to be traded.

Considering various transformations that are undergoing in the global energy landscape, our research problem addresses developments and trends of M&As in the energy industry. On the one hand, the paper seeks to determine and reflect on industry changes in the context of addressing the sustainable development concept. On the other hand, our research recognizes that a focus on sustainable development in the energy industry has led to an increase in M&A activities.

Although energy needs were modest prior to the industrial revolution, the evolution of the steam engine during the 17th and 18th centuries has opened a world of possibilities. Further, coal-powered steam engines, electric generators, and hydroelectric plants introduced in the 19th century have enhanced accessible energy capacities. Affordable vehicles, the spread of electricity, massive power stations, large coal stations, hydroelectric plants, powerlines, and nuclear power plants were the key driving forces of energy production and accessibility in the 20th century. The study in ^[2] has studied historical trends of energy consumption and predicted that it is unavoidable for oil, gas, coal, and renewables to account for a quarter of global energy consumption. On the contrary, Cainenga et al. (2016) observe that currently, each of these sectors reflects 32.6%, 23.7%, 30.0%, and 13.7% of global energy consumption. Similarly, statistics available on Statista forecasts that global electricity generation is expected to double from 24.77 trillion kilowatt hours in 2018 to 44.26 trillion kilowatt hours in 2050. Most significant is the structural change of renewable sources, which are estimated to generate 49% of total electricity generation in 2050. In comparison, currently, renewable sources generate 28% of total electricity generation.

According to the Global Industry Classification Standard (hereinafter GICS), the energy industry consists of firms that are in the business of oil and gas, coal, and other consumable fuels’ exploration, production, refining, marketing, storage, and transportation. Many companies in the energy industry have already implemented or are planning to engage in M&A transactions because they consider M&As straightforward, and in many cases, less expensive than internal development or strategic alliances. However, empirical studies do not provide consent results and do not unambiguously confirm that M&A transactions generate economic return. Similarly, an open question remains whether related or unrelated M&A leads to better results. In addition to growth itself, M&A transactions in the energy industry seem promising in many cases since they may improve operational efficiencies and analytical capabilities. Issues of operational efficiencies and analytical capabilities are essential and urgent, especially for oil and gas companies, because currently depressed prices mean that profits are hard to come. On the other hand, they are also essential for renewable energy, which has been quite expensive in some cases, because the infrastructure is not in place.

2. Developments and Trends of Mergers and Acquisitions in the Energy Industry

This entry is adapted from the peer-reviewed paper 10.3390/en14082158