Asia whets M&A appetite

SINGAPORE, Indonesia, China, Mexico and Nigeria are the most attractive emerging markets with falling valuations and new strategic deal structures presenting lucrative outbound investment opportunities amid continued oil price volatility, new research has found.
Asia whets M&A appetite Asia whets M&A appetite Asia whets M&A appetite Asia whets M&A appetite Asia whets M&A appetite

New research from law firm Pinsent Masons revealed that the oilfield services sector is in for an M&A surge as buyers capitalise on distressed players to grow market share with the acquisition of new technology.

Just under three-quarters (70%) of the firm's survey of 200 oilfield services senior executives said they were actively considering an acquisition within the next year, with 74% pinpointing expansion of overseas operations as the main driving force and 70% expecting opportunism around distress assets to drive deals.

Technology-driven consolidation is being sought by 60%, with corporates operating in the offshore technology and equipment systems seen as the most attractive targets.

In more mature markets, two thirds (67%) of respondents said the UK would be likely to yield opportunity for buyers over the next three years.

Pinsent Masons global head of energy Bob Ruddiman described the new landscape was "very different" from other downturns, with a more complex world where supply and demand and significant geopolitical events are conspiring with unpredictable consequences.

"Despite that, it's encouraging to see a sense of optimism and long-termism in the sector as oilfield services companies seek to find opportunity amid the undoubted challenges," Ruddiman said.

Pinsent Masons' oil and gas partner David McEwing said that while much of the chatter around oil and gas deals has focused on the majors and how they will respond to a more volatile environment, it should not be forgotten that the global oilfield services sector was on course to be worth $US144 billion by 2020.

As such, it is still a significant employer and wealth creator.

"What our research shows is an industry on the cusp of transformation," McEwing said.

"Corporates are clearly looking to build out their international propositions and invest in technology which will maximise efficient recovery. It's no surprise that the UK stands out in that regard given the industry's focus on innovation and deep sea exploration - not least when we're seeing more of those types of projects in Asia.

"There is encouragement to be taken from the optimism surrounding UKCS. There has been discussion in some circles about whether UKCS could ever recover to previous levels of profitability, but an overwhelming majority of those we spoke to see a recovery within 3-5 years, and almost a third think this will happen before then.

"That said, there's no complacency and boards are clearly focusing hard on their corporate strategies. Yes there's challenge but for some that means a chance to challenge the status quo in a dynamic market."

  • NEW: Digital version of PNG Report magazine - View here
  • Porgera: Barrick-PNG talks go on - Read more
  • Follow the companies investing in the PNG market - Read more