I’ve discussed recently how mergers and acquisitions are a key play for oil and gas companies. A report from Ernst & Young, “Dynamic dealmaking in oilfield services,” confirms these predictions, in this case for the oilfield services industry.
As one CFO interviewed for the survey stated, a slow economy makes it difficult to grow organically, so M&A is seen as an alternative for growth:
“M&A fulfils many aspects of growth strategy, like access to new technology, access to new markets and much-needed diversification of business.”
In particular, the report shared three facts from the survey that are worthy of note:
- 80% of respondents said North America will see a big jump in M&A activity
- 54% said changes to regulatory framework are the biggest challenge to their business strategy
- 42% said economic and commodity price uncertainty is the biggest macro threat
In addition to these challenges, according one investor, shale development has increased the need for technology and equipment, with a resulting “surge of drill activity [that] is leading long-term improvement in the oilfield service sector.”
All of these investments also require that service companies find ways to maximize their return:
1.Utilization of Technology: As service companies make big investments in technology, they also need to ensure that it is being fully utilized. See an example of how an Entrance client manages this here.
2. Merger Success: 50% – 70% of merger and acquisition transactions fail to ultimately create incremental shareholder value, oftentimes due to failed post-merger integration. Check out one successful integration…
You can also visit our knowledge base for more resources on data management during mergers and acquisitions right now!