Investors with industry insight can drive North Sea deals, says KPMG

Specialist investors with an understanding of the cyclical nature of the oil and gas industry see opportunities in the current oilfield services market, according to KPMG.

Aberdeen-based partner and head of oil and gas mergers and acquisitions Dane Houlahan said that while uncertainty over the price of oil created challenges in relation to valuations, investors with experience of the sector could see opportunities in the current market.

KPMG recently advised Vine Street Capital and the management of Lymington Precision Engineers Ltd (LPE) on its sale to Senior PLC, a FTSE 250 international manufacturing group.

Mr Houlahan said the deal represented a positive strategic outcome for LPE and had added significance given the challenging market conditions for oil and gas.

“Our team proactively advised the shareholders throughout the sale process. Vine Street Capital backed the current management team of LPE in a February 2011 management buy-out and supported their strategy to consolidate and extend LPE’s leadership in precision machining for highly demanding applications,” said Mr Houlahan.

Mr Houlahan, who was part of the multi-national KPMG team attending OTC in Houston last month, said that 2015 represented a much more challenging environment for M&A activity.

“There will still be strategic deals happening as the industry reorganizes, although the nature of the transactions and M&A processes will be very different to the wider, aggressive bull market auctions we were used to seeing in 2013 and early 2014.

Trade buyers and specialist investors who understand the cyclical nature of oil and gas will see this as a great time in the market to be acquiring,” said Mr Houlahan.

“Forecasting and agreeing transaction pricing at the moment is particularly difficult and is the big stumbling block on many deals, although we would expect this to improve as the market stabilises.

“Finding an absolute consensus view at the moment is difficult. Clearly a lot will depend on the oil price but the key message from the North American market seemed to be some expectation that by Q1 next year we might see sufficient stability back in the market to drive some additional M&A activity. Assuming that’s the case, we would expect that to translate into increased European and rest of world deal flow in due course.”