M&A transaction value falls by half
The level reached the lowest since the 2008 recession, marking a shift in focus
The transaction value for the industry’s merger and acquisition activity across the globe fell by almost half during 2013 to $136 billion. This is the lowest level since the 2008 recession.
The decline marked a turning point as companies shifted their focus to developing their vast inventories of previously acquired assets. Around $600bn worth of deals were closed between 2010 and 2012, according to IHS. Data from the research firm showed the number of deals worldwide fell by 20% from its 10-year high in 2012 following a sluggish first half in 2013. But activity accelerated in the second half of the year.
Not surprisingly the Chinese national oil companies (NOCs) dominated the largest deals. Together with other Asian and Caspian regional NOCs, the group made up half the buyers in the 10 biggest deals of 2013.
NOCs and sovereign wealth funds remain the dominant buyers. The two groups have been at least one of the buyers on more than 75% of international asset deals by value in 2013, research from Derrick Petroleum Services shows. They doubled their acquisition spend from less than $20bn in 2012 to more than $40bn in 2013. Chinese NOCs continue to lead with $18.9bn spent in Kazakhstan, Mozambique, Egypt, Peru and Angola.
Spending on unconventional deals plunged by more than half to about $40bn as low gas prices and varied drilling results put buyers off emerging North American basins, reported IHS.
North American acquisitions made up only three of the largest 20 deals during 2013. The North American market’s share of the worldwide transaction value narrowed 5% to 45% from the year before as buyers chased prolific international discoveries.
Deals in West and East Africa more than doubled the market share of the Africa and Middle East region to 15%, while spending in Latin America hit 7%. The Russia and Caspian region made up more than 25% of the global deal value for the second consecutive year, as Rosneft continued to expand its domestic holdings. The combined value of deals in Canada, Europe, and Asia, marked just over 15% of the global total, down from nearly 30% in 2012.
By the end of last year more than $126bn of assets were on the market as disposals start to gather pace, reported Derrick Petroleum Services.
Many of the majors are expected to refine their portfolios and sell non-core assets over the next few years. But as the supply of assets on the market increases it is taking longer to close deals. Nevertheless prices are holding up – so far. Data from Wood Mackenzie estimates the value of potential deals – which includes disposals as well as acquisitions – at around $300bn. Most of the companies are selling for strategic reasons rather than out of financial necessity, says the energy research firm. But if that were to change there could be some good buying opportunities.