M&A activities to surge this year, companies to look East

MA Kritchanut shutterstockAlmost three quarters of the respondents pinpointed expansion of overseas operations as the main driving force behind deal activity. (Image source: Kritchanut/Shutterstock)The need to capitalise on distressed situations, grow international market share and acquire new technology will drive a surge in M&A activity in the oilfield services sector during 2016, according to a new research from international law firm Pinsent Masons

David McEwing, partner in the oil and gas team at Pinsent Masons, said, “Much of the discourse around oil and gas deals has focused on the majors and how they will respond to a more volatile environment. However, it shouldn’t be forgotten that the global oilfield services sector is on course to be worth US$144bn by 2020.

“What our research shows is an industry on the cusp of transformation. Corporates are clearly looking to build out their international propositions and invest in technology, which will maximise efficient recovery. It’s no surprise that the UK stands out in that regard given the industry’s focus on innovation and deep sea exploration — not least when we’re seeing more of those types of projects in Asia.”

A survey of 200 senior executives across the oilfield services industry has revealed that despite unprecedented price volatility, 86 per cent of respondents expect a surge of deal activity in the next one year. Seventy per cent said that they were actively considering an acquisition within the next year.

Almost three quarters pinpointed expansion of overseas operations as the main driving force behind deal activity, with 70 per cent expecting opportunism around distressed assets to drive deals, while 60 per cent are looking at technology-driven consolidation. Companies operating in the offshore technology and equipment segments were seen as the most attractive targets.

Respondents revealed that Singapore, Mexico, Indonesia, China and Nigeria are the most attractive emerging markets with falling valuations and new strategic deal structures presenting lucrative outbound investment opportunities against the backdrop of continued oil price volatility.

In more mature markets, two thirds of respondents said that the UK would be likely to yield opportunity for buyers over the next three years.

The research also found that 83 per cent of respondents have based their five-year investment strategy on an oil price range of US$60 to US$80 bpd in the face of the new ‘lower for longer’ consensus across the oil and gas industry.

Global head of energy at Pinsent Masons, Bob Ruddiman, added, “The new landscape is very different from other downturns. We are in a more complex world where supply and demand and significant geopolitical events conspire with unpredictable consequences. Despite that, it’s encouraging to see a sense of optimism in the sector as oilfield services companies seek to find opportunity amid the undoubted challenges.”

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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