Mergers and acquisitions in the N. Sea oil exploration and supply chain industries are looking more likely over the next 18 months as operators come out of ‘survival mode’ and look for new business opportunities.
According to accountancy services firm KPMG, oilfield services companies that have adapted their businesses during the downturn and have relatively stable trading patterns are beginning to think strategically about how to position themselves for future growth opportunities.
With fragile stability returning to oilfield spend and activity, KPMG expects to see a modest revival in M&A activity in the service sector through 2017 and 2018.
These were the key findings from responses – the first such held in Aberdeen for nearly two years – from more than 40 businesses which attended the M&A seminar.
Alan Kennedy, KPMG partner and UK head of oilfield services, said that ‘the growing sentiment in the sector was that the market had stopped getting worse, prompting companies to start looking ahead to new opportunities.
He added: “There is a growing view that things have stopped getting worse, at least in some areas of the sector. Companies that are in reasonable shape in terms of their balance sheets, have sorted out their finances and have stabilised their trading at today’s lower level are beginning to think strategically again and looking ahead three to five years.
“M&A growth through acquisition is a big tool in the box for them when there’s limited organic growth to be achieved through new projects in the current market.
“Interestingly, attendees still see private equity as the likeliest source of capital for growth in the short to medium term and we expect to see North American bidders active in the UK domestic market, capitalising on the weakness of £-sterling.
“An increasing number of companies in the sector are saying they anticipate being involved in M&A activity in the next 18 months.
“The market themes that we expect to see through 2017 and 2018 are global integration of services over the life of field, diversification into downstream and adjacent space, non-cash mergers and private deals, as opposed to auctions. The short and long term value of sterling is also going to play a part in the UK market.”