Credit crunch may fuel oil and gas M&A

4 Dec 2008 - TheDeal.com - Nearly three-quarters of oil and gas CFOs polled in a recent survey said they expect the U.S. economic crisis to impact their ability to borrow money or extend bank debt in 2009. In addition, well over half the 100 executives surveyed by the accounting firm BDO Seidman LLP in October and November said that credit capacity restraints, including access to capital, will be their greatest challenge next year, followed by falling oil or natural gas prices. "They feel gravely concerned about raising money," said Charles Dewhurst, a partner at the firm and leader of its national energy practice in Houston.

Dewhurst says the credit drain may lead more companies to consider buyouts or bankruptcy as a solution. "With less credit and lower prices, smaller E&P [exploration and production] companies are going to be attractive acquisition targets for larger companies, and because of debt constraints, many are going to feel compelled to sell," he said.

Companies that put together projects and borrowed money based on $150 barrel oil will be most vulnerable. Read more.

Looking for deal activity in '09? Think energy, healthcare and tech

Nov. 18 - Thedeal.com - The 2009 outlook for M&A activity is bleak for most sectors, but it's not universal. Jeff Bistrong (pictured), a managing director with the middle-market investment bank Harris Williams & Co., predicts relatively robust dealflow in energy, healthcare and technology. Here's what he had to say about each sector:

Energy: "The downward movement in equity and commodity prices in the energy market will temper short-term deal activity," says Bistrong, "but it will not undermine the long-term prospects." He points to the sale his firm helped facilitate in October of energy maintenance, repair and industrial cleaning provider Aquilex Holdings LLC from Harvest Partners LLC to the Ontario Teachers' Pension Plan as an example of the healthy appetite for deals in the sector. "We've invested heavily in this space, and we'll continue to do so," says Bistrong.

Healthcare: Harris Williams helped sell online health counselor HealthMedia Inc. in October to Johnson & Johnson Services Inc., and the company is working on the sale of three additional healthcare companies operating in the Internet space. Bistrong predicts decent dealflow in the healthcare sector because it is secular from the macroeconomic environment, but he says activity will be particularly robust among healthcare IT companies.

Technology: The software-as-a-service model is driving deal activity in the tech sector. That's a change, says Bistrong, from the not-so-distant days when lenders favored deals involving hardware companies with assets to sell over software companies with less predictable cash flow. Now, he says, "lenders are supporting tech growth by focusing on software companies with recurring revenue models, often subscription-based, where there is significant revenue visibility, and therefore significant visibility into cash flow. Read more.

Duke CEO Sees M&A For All Independent Power Firms

Nov. 12 - PEHUB - The remaining independent U.S. power producers will likely all be involved in some sort of merger or takeover activity in the next year and a half, the head of Duke Energy Corp told Reuters on Tuesday.

A hostile takeover attempt of NRG Energy Inc by Exelon Corp, and the purchase of Constellation Energy Group Inc by MidAmerican, has shaken up the industry’s view of so-called merchant power providers.

So analysts and executives now wonder who will be next in a sector that includes Mirant Corp, Dynegy Inc, Reliant Energy Inc and Calpine Corp.

While he did not name any specifically, Duke Chief Executive Jim Rogers said generally: “I think within 18 months you’ll see either consolidation or acquisition of all of them.” Read more.

Alternative Energy M&A Trends - June 2008 (Report)

From Research & Markets.com:

Summary - Alternative Energy M&A Trends June 2008 Report is an excellent source providing detailed information on M&A, Equity/Debt Offerings, Private Equity, Venture Financing and Partnership transactions in the Alternative Energy industry. The report also provides detailed comparative data on the number of deals and their value in the last six months subdivided by sector and geography.

Scope

• Comprehensive summary of Alternative Energy deals globally in the last six months
• Trend analysis of deals by sector and type
• Information on rumored and upcoming deals before they occur- Summaries of the most important deals Purchase report.

M&A Activity Down but Not Out: Strong Cross-Border Deal Environment, Middle Market and Corporate Deal Activity and Robust Sectors Bolster M&A Market

June 16 - PRNewswire - With approximately US$1 trillion in global deal volume recorded during the first 19 weeks of 2008 vs. US$1.4 trillion during the same time last year, total transaction volume so far in 2008 has fallen below the record highs of 2007. However, merger and acquisition activity is expected to stabilize throughout the remainder of 2008 and the first half of 2009, according to Ernst & Young LLP's Transaction Advisory Services group.

"PE firms and corporations still remain armed with tremendous arsenals of cash to conduct transactions once the lending environment is restored,"said John O'Neill, Ernst & Young's Americas Director of Private Equity. "Once the overhang from the credit crunch is gone and lenders return to the transactions table and sellers adjust to more rational price expectations, we expect to see this cash funneled directly into the deal market." Read More.

Mining Replaces Financial Services as Biggest Driver of M&A

June 12 - Bloomberg - Metals are the new green on Wall Street, as mining has displaced financial services to become the biggest source of mergers and acquisitions.

The value of announced mining takeovers more than tripled to $199 billion in the first five months of 2008 from a year ago, even as the global pace of M&A dropped 37 percent, data compiled by Bloomberg show. Financial-services companies, the largest driver of merger fees for the past two years, disclosed $173.5 billion of transactions in the first five months. It's the first time mining mergers have topped the M&A table since Bloomberg began compiling the data in 1998.

"We have moved into the age of commodities," said Carl Hughes, a London-based partner at Deloitte & Touche LLP, who oversees the firm's energy and resources practice. "You clearly have a large number of mining companies just generating cash and profit like there is no tomorrow." Read More.

What to make of this frenzy of energy deals?

June 11 - Corporate Dealmaker Blog (The Deal) - "Duane was in the hot tub, shooting at his new dog house with a .44 Magnum."

That's how Larry McMurtry began "Texasville," his 1987 sequel to "The Last Picture Show." Having gotten rich in the energy boom of the early 1980s, Duane Moore opens this novel teetering on the brink of bankruptcy amidst the subsequent bust.

A couple of items in Wednesday's news bring Duane to mind. One is the acquisition of Hunt Petroleum Corp. by XTO Energy Inc. for $2.6 billion in cash plus $1.6 billion worth of XTO's hot stock. This is XTO's third deal since April, and CEO Bob Simpson says he expects to do another $1 billion to $1.5 billion worth of deals this year. He's not the only one; energy deals are surging right along with energy prices. Read More.

A New Direction in Energy M&A

June 3 - The Motley Fool - When it comes to onshore drilling for oil and especially natural gas, directional is the new vertical.

Now that the industry is targeting shale plays like the natural gas-bearing Marcellus and the oil-bearing Bakken, players such as Devon Energy, Chespeake Energy, and XTO Energy all have to send their drillbits sideways to hit more "pay."

This is a major boon for drillers like Precision Drilling Trust, whose rigs are able to perform this more demanding directional activity. Another beneficiary of the trend is W-H Energy Services, whose PathFinder subsidiary provides both the personnel and the equipment to hit those hard-to-reach reservoirs. Read More.

A little perspective on surging oil, mining, utility M&A

April 2 - Corporate Dealmaker Blog (The Deal) - While the world laments the death of M&A given the credit crunch, financial institutions crumbling and the gyrating stock market, oil and gas, power and mining deals are thriving. According to three separate reports over the past month by PricewaterhouseCoopers, M&A value levels were up .3% in the oil and gas industry last year to $292.2 billion, up 25% in power to $372.5 billion and up 18% in mining to $158.9 billion.

The figures aren't a big surprise, as demand for energy and natural resources in developing countries like China and India continues to grow and companies' profits continue to surge on record commodity prices. Read More.

Oil, gas M&A undeterred by credit crunch

February 15 - Accounting Age - Mergers and acquisitions deals in the oil and gas industry were edging up slightly throughout 2007 despite the impact of the credit crunch, PricewaterhouseCooper’s latest annual analysis of M&A activity in the sector, O&G Deals, reveals.

The report shows deal totals rose from $US291.1bn to $US292.2bn year on year. There was no clear evidence of a decline in O&G deal activity in the second half of the year as the credit crunch broke, reflected in the number of 2007 final quarter deals – up 7% on the final quarter of 2006. Read More.

Lean year ahead for energy M&A

February 14 - FT.com - Mergers and acquisitions in the energy industry remained robust even during the financial turmoil in the second half of last year, but activity for some types of deal is likely to be weaker this year, according to a survey from PwC, the professional services firm.

Takeovers by companies from emerging markets such as China and India slowed last year and most of the biggest deals involved financial buyers or significant debt financing. Both of those factors are likely to be less evident this year because of tighter credit conditions, M&A advisers believe.

Michael Hurley, PwC’s UK head of energy, said: “It is going to be more difficult for some of the deals in downstream businesses, which are more linked to the economic cycle, to get away.” Read More.

Power sector M&A reached new record in 2007 - PwC

February 5 - CNN Money - The value of worldwide mergers and acquisitions in the power sector increased by 25 pct year on year to 372.5 bln usd, said PricewaterhouseCoopers in its Power Deals annual review.

PwC said there was no indication that the credit crunch which hit the market this summer had a negative impact on M&A in power generating assets with 57 pct of the power sector deals announced in 2007 occurring in the second half of the year (441 of 768 deals).

Moreover, the number of M&A transactions in the power sector was up 73 pct in fourth-quarter 2007 compared to the same period in 2006, while the total value of deals was 21 pct higher. Read More.

U.S. Credit Markets to Create Some Favorable Valuation Opportunities for Buyers in 2008 U.S. M&A Fueled by Corporate and Cross-Border Activity

December 12 - PRNewswire - M&A activity in 2008 will be dominated by corporate and foreign buyers and the middle market will continue to be active, according to the Transaction Services group of PricewaterhouseCoopers. "The era of public-to-private transactions is on hold for now. However, the downturn in mega-deals by private equity will be offset by an increase in international buyers coming into the U.S. to take advantage of a continued weaker dollar. We also believe that more traditional private equity transactions will build momentum as 2008 progresses. We expect financial markets to quickly respond to put liquidity back into more balanced leverage lending," said Bob Filek, a partner in PricewaterhouseCoopers' Transaction Services group. Read More.

Fuel retail market consolidation: some European players emerge stronger

December 7 - Energy Business Review - A number of firms seem to have benefited from consolidation within the European fuel retail market.

Over the last few years, the European fuel retail market has experienced significant changes as a result of falling margins and consolidation, as well as a number of large players choosing to exit certain markets altogether. However, there are signs that this realignment has benefited some smaller companies such as Maxol and PKN Orlen, which are now emerging as dominant players.

Over the last five years, fierce competition and squeezed margins have led to significant changes in the structure of western Europe's forecourt retailing market. These changes include increasing M&A activity, a number of large oil companies exiting selected markets and a decrease in the overall number of service stations.

Dealwatch: Cleantech

November 28 - Dealscape Blog (The Deal) - Cleantech venture investing has hit a record high in 2007, according to data out Nov. 28 from Thomson Financial and the National Venture Capital Association, as U.S. venture firms poured $2.6 billion into 168 cleantech deals in the first nine months of the year. The year-to-date total is already 46% more by dollar volume than all of 2006 and the highest dollar volume ever, the report said.

While the three largest cleantech deals by U.S. firms in the first three quarters of 2007 were in overseas companies, California, Massachusetts and Texas unsurprisingly roped in the most dollars and deals stateside, while solar energy saw the most activity by subsector. The largest funding for a U.S. company, the report said, came in two rounds totaling $115 million for GreatPoint Energy Inc. of Cambridge, Mass., which converts coals, petroleum coke and biomass into clean natural gas, from Citigroup Inc.'s Sustainable Development Investments unit, AES Corp., Suncor Energy Inc., Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, Dow Chemical Co., Advanced Technology Ventures, Khosla Ventures and others. The most active U.S. investors this year have been Khosla, DFJ and Kleiner Perkins, the report said. Read More.

Podcast: M&A Outlook 2008, Three Hot Sectors

November 8 - PodTech - M&A deals in energy, real estate, and health care are some examples of sectors that still show lots opportunity, with some caution. Jason Lopez spoke with experts in each of these sectors at The Deal's "M&A Outlook 2008." In this podcast you'll hear about the nuances of the markets and expectations for next year from two energy pros, Jamie Welch, head of Global Energy for Credit Suisse and Richard Vaccari, VP of mergers and acquisitions at Sempra Energy. Listen to podcast.

M&A Outlook 2008: Energy sector

M&A Outlook 2008: Energy sector

With winter just around the corner and oil surging toward $100 a barrel, the energy sector has been on the minds of consumers as wells as dealmakers lately. A panel of dealmakers gathered Wednesday at The Deal's M&A Outlook 2008 conference at the Ritz-Carlton Hotel Battery Park in New York City to discuss the M&A opportunities in the sector. The general sentiment of the three panelists, Richard A. Vaccari, vice president, mergers and acquisitions at Sempra Energy; Douglas Korn, senior managing director and executive VP at Bear Stearns Merchant Banking; and Jamie Welch, head of global energy, investment banking division, at Credit Suisse Securities (USA) LLC, is that the outlook for energy deals will remain bullish.

Mohr offered some color on trends. This year, she said, really represents the high-water mark of where M&A is globally. Overseas is where the growth lies. In 2007 to date, she said 45% of global M&A has been cross-border. It should be somewhere in the high 40% range by the end of the year. While Europe and U.S. have historically driven this, growth in the rest of the world has almost doubled over recent years. In the second quarter of 2007, there was $800 billion in global M&A volume. In the third quarter, it dropped to $400 million. The fallout largely came from the U.S. and Europe, she said, while volume from the rest of the world was essentially flat. The role of emerging markets and their companion sovereign wealth funds are driving a lot of this. Sectors where activity is hot include: financial services, energy and power, and industrials. Read More.

M&A Outlook 2008: Energy & Healthcare

M&A Outlook 2008: Energy spotlight

Energy has long been one of the largest concerns of the global economy, and with oil prices soaring, unrest in the Middle East and the rise of China, the importance of M&A among energy companies is likely to increase in importance in 2008. Read More.

M&A Outlook 2008: Healthcare spotlight

During the first three quarters of 2007, a total of 722 deals were announced in the healthcare industry worth a combined total of $173 billion, according to investment researcher Irving Levin Associates Inc. The firm notes it now seems unlikely that this year's dollar amount will surpass the record-breaking $267.1 billion reached in 2006. Read More.

Energy Sector Roundup

October 22 - Forbes - Following is a summary of top stories in the energy sector Monday afternoon.

Oil Settles Lower as November Contracts Expire

Oil futures fell on concerns about the economy and profit-taking ahead of the November futures contract expiration.

Crude rebounded from earlier lows by the end of the day. Some analysts said prices firmed after an expected cease-fire between Turkey and Kurdish rebels in Iraq looked shakier than first thought. Read More.

Bubble Energy?

September 11 - Forbes - Talk of an alternative energy "bubble" started percolating in the trade and cyber-press over the past several months. The fact is, the staid Dow Jones industrial average has done as well or better than most alternative energy indexes. So, hot, or not? Since global energy demand is rising unabated, the core question is, How big a piece can alternatives capture?

According to (some) wizards at Harvard, "Solar could meet one-fifth of U.S. energy needs within two decades." At least that's what they said 30 years ago in the widely acclaimed book Energy Future. What happened? If you count as solar both the obvious solar and indirect solar sources such as wind, wood, corn, geothermal and the like, America today hit a collective 4%, or one-twenty-fifth share. Read More.