Unlocking Energy Deal Value through Commercial Due Diligence

Energy M&A in a Shifting Landscape: The Rising Importance of Commercial Due Diligence

In 2025, the energy sector is navigating a uniquely complex merger and acquisition (M&A) environment shaped by geopolitical shifts, trade policy disruptions, and diverging regulatory signals. The reintroduction of aggressive US tariffs—particularly on Chinese imports—has added cost pressures across global supply chains, while the reorientation of US energy policy under the current administration has created a more favorable climate for traditional energy investments. Additionally, recent events in the Middle East have created a much higher focus on energy security, making investments in domestic energy resources a priority for most governments across the world.

The reaction of different actors within the energy value chain varies based on their particular realities, business models, and long-term foci.

Both upstream and midstream oil and gas operators may view this as a positive environment to focus on portfolio optimization, including tactical M&A transactions that are more selective and thesis driven. Operators are prioritizing consolidation for scale, inventory depth, and capital efficiency. Carbon intensity and environmental, social, and governance (ESG) optics are central to valuation. Buyers are demanding rigorous validation of breakeven economics, decline curves, and exit optionality—particularly in unconventional and liquefied natural gas (LNG)–linked assets.

Midstream, storage, and grid infrastructure are benefiting from increased energy security focus and Inflation Reduction Act (IRA) incentives but remain sensitive to permitting timelines and cost escalations. Due diligence must test pipeline utilization assumptions, interconnection feasibility, and regulatory stability at both state and federal levels.

For oilfield services and equipment providers (OFSE), the expected recovery is uneven across sectors. While larger players benefit from high utilization and pricing power in select basins and offshore markets, smaller providers face margin compression, labor constraints, and client-driven pressure to innovate (e.g., digital drilling, low-carbon solutions). Commercial diligence in this space must balance near-term contract outlooks with long-term competitiveness and technology adoption.

In the power and utilities sector, investor interest remains high in regulated and unregulated power, but diligence is increasingly focused on policy risk, rate recovery assumptions, and infrastructure readiness. Delays in transmission buildout and interconnection queues are tempering growth expectations for renewables portfolios. Hybrid assets (e.g., solar plus storage) require more granular modeling of revenue stacking and merchant risk.

Meanwhile, climate technology and clean energy investment activity keep evolving for both venture capital and private equity players. While climate-related startups continue to attract strong investor interest, valuation discipline has returned. Investors are scrutinizing commercialization risk, unit economics, offtake credibility, and capex intensity. Commercial due diligence (CDD) in these segments must go beyond total addressable market (TAM) analysis and dig into go-to-market readiness, technology differentiation, and value chain integration—especially in sectors like green hydrogen, carbon capture, utilization, and storage (CCUS), electric vehicle (EV) charging, and grid software.

The rest of 2025 likely will remain volatile but opportunity rich. Investors who can navigate policy complexity, regional dynamics, and shifting capital flows will be best positioned to unlock value, whether in fossil fuels, renewables, or the technologies that bridge the two. As we pass the midpoint of 2025, the energy sector is navigating a complex and evolving investment landscape characterized by macroeconomic volatility, geopolitical instability, regulatory changes, and an accelerated energy transition. While global M&A activity has regained momentum since 2023, dealmaking in the energy sector remains highly stratified across segments, necessitating precision and insight-driven decision-making.