![]() ![]() Although most deals were less than $1 billion in size, deals greater than $1 billion have contributed the largest portion of transaction value since 2016 (Exhibit 1). Includes only exploration and production company transactions excludes oil field service and equipment, drilling, midstream, or downstream transactions. 4 McKinsey analysis based on global upstream transactions involving 100 percent ownership stake. Over the past 12 years, there have been roughly 750 upstream deals with a transaction value of at least $100 million. In this article, we explore two steps that upstream companies could take to maximize value from their deals and build resiliency ahead of the next cycle. ![]() By making clever decisions, companies can reap the most from their deals. In addition, the choice to publicly announce synergy targets can impact the total return to shareholders (TRS). There is a lost opportunity here for firms to raise their synergy aspirations and look beyond G&A, as M&A deals pursued for operational synergies typically outperform those based on G&A savings. ![]() Many deals are limited to a focus on reducing general and administrative (G&A) expenses and ignore any operational synergies that may exist. 3 McKinsey analysis based on global upstream transactions involving 100 percent ownership stake. However, more than 50 percent of deals in the E&P sector don’t create value for shareholders. Many upstream firms view acquisitions as a “bread and butter” activity that they do well. In this next wave, differentiated value creation will likely underpin M&A success, and set M&A winners apart. 2 Robert Belanger, Jeremy Brown, and Tom Grace, “ Success in the M&A rebound: Riding the coming wave of upstream deals,” McKinsey, February 24, 2023. Now, a new M&A wave is expected, driven by record cash flow in the exploration and production (E&P) sector, among other factors. 1 Robert Belanger, Jeremy Brown, and Tom Grace, “ Success in the M&A rebound: Riding the coming wave of upstream deals,” McKinsey, February 24, 2023. Despite a highly turbulent macroeconomic environment over the past decade, M&A activity in the oil and gas sector has continued, albeit at lower levels than prior years. Mergers and acquisitions (M&A) are a key tool in a company’s value creation toolbox. ![]()
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