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Writer's pictureTodd

Energy M&A Rebuffs Economic Headwinds

As the dust settled from the fevered and historic M&A frenzy from 2H 2020 to 1H 2022, the energy and related services is one of two sectors that proved their economic resilience and strength during the broader market downturn. You’ll see in the graph below that energy deal activity during the 1H 2023 stayed on par compared to the exuberance in 2020-2022 and far outpaced the erosion of deals transacted in the broader markets.

Source: SPS July 2023


Energy M&A remains strong even while corporate buyers have slightly tapped the brakes compared the aggressive deceleration in the overall markets and private equity has sought shelter to deploy their capital in markets that represent strategic add-ons for their portfolio companies. You’ll notice the flight to safety and known markets as add-ons versus buyouts have almost doubled since 2015.

Source: SPS July 2023


Dynamics within the markets has led to more corporate and private equity buyers chasing fewer quality businesses and propping energy business valuations respectively. Median deal flow volumes are expected to increase during the 2H 2023 and the general outlook for the oil and gas industry in 2024 and 2025 is anticipated to be influenced by a combination of factors that will shape the sector's trajectory. The global demand for energy is projected to continue recovering from the impacts of the COVID-19 pandemic, driven by economic rebound, improving debt markets and growth in industrial activities. However, the industry will likely continue navigating a complex landscape characterized by ongoing efforts to transition towards cleaner and more sustainable energy sources. This shift towards renewables and increasing environmental concerns could result in altered investment patterns, with companies aiming to balance traditional fossil fuel operations with a greater focus on renewable energy ventures. Regulatory changes and policies addressing climate goals will also play a significant role, potentially impacting exploration and production activities.


In parallel, advancements in technology, such as data analytics, automation, and digitization, are expected to revolutionize the operational efficiency of the O&G and related services sector. Companies that strive to optimize their operations through these innovations, reducing costs, minimizing environmental impact, and enhancing safety standards will garner the greatest returns.


To learn how your company can benefit and best position itself within today’s oil & gas M&A landscape, call or email me now to receive a free consultative analysis. Our analysis offers clarity, based on your objectives, if a full or partial exit, recapitalization, divestiture, acquisition or pre-sale exit strategy provides the greatest benefit to you and your company.


Vercor has been delivering M&A expertise to the energy sector for over 25 years. We serve as a trusted partner to help build long term, iterative strategies that ensure you are positioned to meet your unique personal, corporate and financial goals whether it is selling, recapitalizing, acquiring or divesting of a division. Now is the time to evaluate, strengthen, prepare and increase the market value of your company regardless of your timeframe.


Todd Cummiskey

Vercor

704-926-6564

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