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Could more mergers and acquisitions be on the horizon?

Oil prices have fallen by roughly 50 per cent since June 2014, and the industry is still discovering exactly what this means. Whil the industry is still adapting to deal with the short and long-term issues that this has brought up, there are several positives that are yet to come out of this.

Any major development in the oil and gas trade is bound to create opportunities that can be capitalised on by enterprising companies, and this is no different. According to one analyst, oil firms will soon be seeing an increase in the number of mergers and acquisitions (M&As) that occur within the industry.

This could create an excellent environment for business, particularly for firms able and willing to put themselves in advantageous positions. If dealt with intelligently, the current low price of oil could end up being a boon to some companies.

 

A year of mergers

Global management consulting firm AT Kearney has conducted a study on M&As in the oil and gas industry that drew this conclusion. The firm found that in 2013 M&As were relatively rare, but they increased strongly throughout 2014 as the oil price dropped. The firm sees no reason why they won't continue into 2015.

In fact, AT Kearney predicts that the number of M&As will see even more strong growth throughout 2015. This will occur all across the industry, with the consultant even saying that increased M&A activity would be "key" to increasing the value of the companies involved.

"Our analysis and discussions with industry executives revealed the likely onset of a new wave of mergers and acquisitions across the value chain in the next 6 to 12 months," said Richard Forrest, global lead partner for the Energy Practice and co-author of the AT Kearney's oil and gas M&A study.

 

Who will this effect?

This increase in M&As is not going to be good news for everyone, of course. Some firms might find themselves forced into mergers they are unhappy with, due largely to the fact that they had not prepared for this development. AT Kearney predicts that the growth of M&As is likely to affect certain sectors more than others.

Most of the new M&As seem set to occur in the upstream sector of the oil industry, which is also where the highest-value deals will take place. Alvin See, principal and co-author of the oil and gas M&A study, also predicts significant value increases in the midstream, as well as among oil service providers.

In addition to this, it seems that international oil companies will be the biggest driver of M&As in 2015. National firms will still be responsible for some activity, but their actions will be limited slightly by the ideologies and long-term plans of their governments.

 

Actions to take

Companies throughout the industry will need to prepare for this, but how they go about doing that will very much depend on their current status. For example, a large company with a well-optimised portfolio will want to consolidate its position with a few well-researched acquisitions.
Smaller firms, on the other hand, may want to formulate their plans for survival. Planning will be everything at this stage. Mr See said: "Across sectors, the companies that best anticipate, and prepare to take advantage of, the fast-moving and volatile market will be in a much stronger position than their peers."


Related Events

Event07 Oct

KIOGE 2020

7-9 October, 2020
KAZAKHSTAN

ALMATY, KAZAKHSTAN
Venue: ATAKENT EXHIBITION CENTRE

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