M&A Likely to Heat Up in Second Half

M&A Likely to Heat Up in Second Half
Bankers and analysts during a panel at IHS CERAWeek opined on the relatively slow state of mergers and acquisitions; most expect it to pick up this fall.

Collapsing oil prices have left both the equity and debt markets catching their breath for the first part of 2015, bankers and analysts said during the IHS CERAWeek panel, “Capital Markets and the Financing of Upstream Investment in a Low Price Environment,” this week.

But still, there’s confidence in the energy sector.

“The rate of change over the last six months has been dramatic,” said Nathan Strik, energy utilities sector leader at Fidelity Investments. “We’ve been internally impressed and surprised by how much capital has come to the fore here in the first quarter. I suspect during the second half of the year, you’ll see a lot more M&A (mergers and acquisitions) across the spectrum, from smaller transactions all the way up to the much larger ones.”

Strik said there may be room for some crude price recovery, which will no doubt raise interest in assets.

However, he added, “I think everybody’s throwing out the $90, $100 assumptions. This does take some time to play through.”

And, energy looks pretty exciting because of the down cycle, he said.

“A lot of capital is flowing into the space and it seems to us that there’s a lot of capital on the sidelines that’s very fearful of missing out on the upturn. In some cases, we think the fear of missing out on the upturn is greater than the fear of making a bad investment, which is a dangerous situation to be in,” Strik said.


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