SPE young professionals (YPs) workshop “The Future Is Now,” held in June in Bangalore, India, covered topics from geopolitics to fundamentals of management and included a session on mergers and acquisitions (M&A) titled “Mutually Beneficial Alliances.” The goal of the M&A session was to help YPs understand how M&A deals can be used to create value, improve the economical or technological standing, or survive the competitive environment. Along with insight into key aspects of the M&A activity in the energy industry, the session also covered the importance of joint ventures, which help companies overcome challenges and grow mutually. Various statistical analyses were presented, which covered the dynamics of the market.
Yashodeep Deodhar, founder and managing partner of Derrick Petroleum Services, a publisher of databases and research for the oil and gas industry, was the first speaker. He started by citing the fact that around 3 to 10 M&A deals happen per day and explained the two types of deals: corporate and assets. He said that every buying or selling organization tries to balance its portfolio and be at a better place in the industry. Using several graphs, Deodhar summarized the status of M&A activity in the various segments of the industry and explained how they are affected by the price volatility:
In the first quarter of 2015, only 16 deals of value greater than USD 100 million have happened.
The majors are only interested in corporate deals, national oil companies (NOCs) have significantly stopped buying, and not much is happening in the midstream segment.
The oilfield services have been badly hurt by the price drop.
Downstream industry is stable as low crude prices help to increase refining margin.
With increasing development costs, sustainability becomes critical for companies. FMC Technologies’ business manager for India, Venky Gopalan, spoke next. Having seen the alliance between FMC Technologies and Technip to form Forsys Subsea, Gopalan was able to share his insight on the strategies involved in M&A activities. The alliance is based on the concept of changing the design to reduce complexity and time in order to increase field performance. He said that early involvement with operations in the concept selection phase and promoting integrated design adds value to the venture.
Anirban Mukherjee, senior principal and member of the leadership team of energy practice with the Boston Consulting Group (India), concluded the session. His presentation explained how the hydrocarbon industry uses M&As, partnerships, and alliances to scale up its business. M&As take place due to many strategic business reasons that mainly revolve around improving the economical or technical standing of the company. The main motives for M&As according to him are resource-deficit NOCs looking for energy security, alliances emerging from specialist services, opportunities in the unconventional, strategic buys led by the price drops, and emerging upstream technologies attracting major investment.
Photo: Session chairs and speakers of the M&A session of the SPE YP workshop, “The Future Is Now,” held in Bangalore, India. Right to left: Chetan Chavan, Chanpreet Sahni, Yashodeep Deodhar, Venky Gopalan, and Anirban Mukherjee.