A new report titled Ernst & Young Dynamic Dealmaking in Oilfield Servicesreleased by mergermarket and Ernst & Young, has revealed that 84% of the survey respondents anticipate an increase in mergers and acquisitions (M&A).
Among 50 respondents, including private equity practitioners and industry executives in the oilfield services sector, approximately three quarters have planned to acquire firms based in North America (80%), Asia-Pacific (52%), Africa (12%), Eastern Europe (14%) and Western Europe (26%).
About 88% of respondents said that access to new customers and markets are the main acquisition drivers, followed by vertical integration to access new technology and expand services. Oilfield Services (OFS) firms intend to seek opportunities to widen the service offerings.
54% of respondents stated that alterations in regulatory framework are the main challenge to perform the business plan. Uncertainty in commodity and economic price represents the second challenge.
According to Global Transactions Advisory Services Leader for Oil & Gas, Andy Brogan, the energy division encounters so many pressures that need companies to stay proactive and lively in expecting and adapting towards the changing environment. The integrating potential will be a key to reach success in the developing markets, while harmonizing the potential to provide cost synergies in the emerging markets. OFS firms can increase potential of earning and reduce risk, through joint ventures and M&A.
The business environment that is uncertain represents a significant threat in the OFS division, resulting in potential barriers to financing of firms. More than half of the respondents anticipate OFS firms to access the equity in one or two years.