Oil and gas capital confidence barometer

Mergers and acquisitions outlook

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Desire to make larger deals is now visible — as expectations for deals greater than US$500m has increased sharply in the last six months.

These expectations, along with the increased deal volumes, are clear indicators that a more robust dealing environment is on the horizon. They signal companies have confidence in their capital structures, deal fundamentals and in a real sustainable economic recovery.

EY chart on pursuing acquisitions, 2013

The anticipated narrowing of valuation gap can also be seen as a precursor to more deal-making. As companies begin to act on their intentions for deal-making and their imperative to grow, it will trigger deals of varying size across the global oil and gas marketplace.

Other trends we observe include:

  • Appetite for M&A increases
  • Deal volumes are expected to increase
  • Acquisition appetite increases as confidence improves
  • Market share objectives driving acquisitions
  • Bolt-on acquisitions favored over transformative deals
  • Pricing divergence reflects valuation uncertainty
  • Valuation gaps expected to widen
  • A cautious approach to emerging markets
  • Unforeseen liabilities as biggest threat to deal expectations
  • Divesting activity shifts down
  • Optimization moves to the forefront
  • Execution risks and business disruptions were the big deterrents to divestments

Q. Do you expect your company to pursue acquisitions in the next 12 months?

EY chart on pursuing acquisitions, 2013

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