M&A activity in the Oilfield Services industry expected to increase over next 12 to 24 months
Singapore, 31 August 2012 – A newly released report, EY Dynamic Dealmaking in Oilfield Services, by EY and mergermarket indicates that the vast majority of the survey respondents (84%) are expecting an increase in M&A and none expecting a decrease.
Nearly three-quarters of the 50 respondents comprising industry executives and private equity practitioners in the oilfield services sector, plan to make acquisitions in the next 12 to 24 months. Companies based in North America (80%) are expected to lead in activity, followed by Asia-Pacific (52%), Western Europe (26%), Eastern Europe (14%) and Africa (12%).
Multiple drivers explain the increase in appetite for M&A. Access to new markets and customers (88%) was cited as the primary driver of acquisitions, while vertical integration to extend services and access to new technology (78%) followed closely. Oilfield Services (OFS) companies will also look for opportunities to broaden and expand their service offerings.
Fifty-four percent of respondents cited changes in regulatory framework as the biggest challenge to executing their business strategy, with the second greatest challenge (50%) identified as economic and commodity price uncertainty. One-fifth of respondents said political upheaval in major oil provinces presents the biggest macroeconomic threat, while an additional 20% singled out the possibility of resource nationalism as the primary challenge.
Andy Brogan, Global Transactions Advisory Services Leader for Oil & Gas at EY says: “The energy sector faces multiple pressures requiring companies to remain nimble and proactive in anticipating and adapting to the changing environment. The ability to integrate will be vital to success in the emerging markets while balancing the ability to deliver cost synergies in the developing markets. Through M&A and joint ventures, OFS companies can minimize risk and maximize earning potential.”
Sanjeev Gupta, Asia-Pacific Oil & Gas Leader at EY adds: “The rising domestic demand in emerging Asia is pushing major national oil companies to ramp up their activity around the globe. On the OFS sector, industry players in China, India and the broader region are gaining prominence due to highly cost-efficient manufacturing, which makes for strong market sentiments over the coming period.”
The uncertain business environment has created considerable risk within the OFS sector, causing possible obstacles to companies’ financing. Despite the short-term difficulties, just over half of the respondents expect OFS companies to have greater access to equity over the next one to two years.
EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
EY refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
How EY’s Global Oil & Gas Center can help your business
The oil and gas industry is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY’s Global Oil & Gas Center supports over 9,000 oil and gas professionals with technical experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oilfield service sub-sectors. The Center works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant key industry issues. With our deep industry focus, we can help your organization drive down costs and compete more effectively to achieve its potential. For more information, please visit www.ey.com/oilandgas.
mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service, with the largest network of dedicated M&A journalists on the ground in 65 locations across the Americas, Asia-Pacific, Europe, the Middle East and Africa. This team focuses on gathering actionable proprietary intelligence, creating the only origination database of live targets and bidders. mergermarket is also an unrivalled source of deal history. Public and private deals across a range of sectors can be searched using an exhaustive database. This proprietary intelligence and historical deals database is available to over 145,000 individual subscribers from more than 1,600 of the world's principal advisory firms, investment banks, law firms, private equity firms and corporates. mergermarket is part of The Mergermarket Group, which has over 600 employees worldwide and regional head offices in London, New York and Hong Kong.