Oil, Retail and Crypto Are Hot M&A Sectors. Watch For Big Deals From These

High interest rates worldwide have generally led to a subdued M&A market, with deal volumes down 30% compared with the first half of 2023, according to PwC. However, they’re still happening, including some big ones.

“Deal values have held their own, growing 5% in the first half of 2024 mainly because of megadeal activity in the technology and energy sectors,” said Brian Levy, a partner at PwC United States, in a recent report. 

The oil-and-gas sector has been the standout when it comes to acquisitions, with

Diamondback Energy

and privately held Endeavor Energy Resources agreeing to merge to create an oil-and-gas giant worth more than $50 billion, while

ConocoPhillips

struck a deal to buy

Marathon Oil

for $22.5 billion. 

The biggest deals may have already happened.

Exxon Mobil

and

Chevron

are digesting their own acquisitions of more than $50 billion each for Pioneer Natural Resources and

Hess
,

respectively, both announced late last year. 

However, some smaller companies could now have to bulk up or become targets themselves. That’s likely the case for

Devon Energy
,

which was widely reported to have been in the running to acquire Marathon Oil. With a market capitalization of around $30 billion, it was cited recently by Siebert Williams Shank analyst Gabriele Sorbara as a target that could move the needle for an acquirer, alongside

Civitas Resources
,

Coterra Energy

and

Ovintiv
.

Meanwhile, retail has become a hotbed of M&A activity. Macy’s is already the subject of an attempted buyout by investment firm Arkhouse Management and asset manager Brigade Capital Management. Its peer Nordstrom is currently evaluating whether the company should be taken private by a group of its eponymous family members, including CEO Erik Nordstrom.

That naturally brings the mind to mind fellow retailer

Kohl’s
,

which has fallen 25% this year so far and now has a market capitalization of $2.39 billion. The department store operator was reported earlier this year to be under pressure to sell itself from hedge fund Vision One Management Partners, according to Reuters. The retailer rejected a takeover offer worth $9 billion back in early 2022. 

The cryptocurrency sector is another where M&A might be the product of market weakness demanding consolidation. Bitcoin’s halving in April—the programmatic monetary policy change which cuts the issuance of new tokens in half—has made it harder for the companies that mine the cryptocurrency by solving complex puzzles. 

The largest Bitcoin miners are now looking to swallow smaller ones which have become less profitable.

Riot Platforms

recently dropped a bid to buy smaller peer

Bitfarms

but is still pushing for a board shake-up which could revive the deal. Meanwhile, Bitfarms—currently valued at $997 million—has said it is looking at other approaches and alternatives.

Bitcoin miners also have access to computing power that could be converted to other uses such as generative artificial intelligence.

Core Scientific

said last month that it had rejected an unsolicited takeover proposal from its cloud-computing partner CoreWeave, saying the roughly $1.02 billion bid significantly undervalued the company.

Write to Adam Clark at adam.clark@barrons.com

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