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North America’s energy sector is witnessing increased interest from private equity firms, a decline in foreign buyers, and an IPO market in the midst of a rebound, according to Surging Ahead: Energy M&A in 2017, a new report prepared by Firmex in conjunction with Mergermarket.
To understand the opportunities and challenges, Mergermarket interviewed four oil & gas and renewables experts from Torys, Citi, Raymond James & Associates, and KeyBanc Capital Markets for their insights. These market practitioners agree that the energy landscape in North America, while complex, still holds plenty of dealmaking opportunities.
Key figures in the report:
- PE energy buyouts doubled last year from 36 to 78 deals, while total values tripled from US$7bn to US$24.8bn.
- The most inbound activity by country for energy asset acquisitions came from the UK (46), China (26), Japan (25), and Australia (22) over the last five years.
- There have been six energy IPOs totaling US$1.79bn in the first five months of 2017, compared to five debuts at US$1.55bn in all of 2016.
- Taking into account growing PE interest, foreign buyers’ continued attraction to Canada, and the possibility of energy IPOs in the pipeline, dealmakers are optimistic for the prospects of North American energy.
Points of discussion include:
- Which regions are ripe for energy dealmaking at the moment?
- What are the current drivers for foreign buyers?
- Will energy IPO activity rise or decline in the coming 6-12 months?
- How is the deal landscape shaping up for alternative energy?
While North American energy assets are seeing a rise in PE interest, foreign buyers are decreasing. However, most of the existing inbound activity to North America has involved Canadian targets. Scott Cochlan, Partner and Co-Head of Torys’ Capital Markets Practice, explains: “The cost of land is lower in Canada and the exchange rate is currently favorable for US investors. In Canada, there are deals to be had in acquiring ‘tuck-in’ assets or purchasing a small or micro-cap company where acquirers believe it can cut costs and make money on the efficiencies.”