Energy and power mergers and acquisitions activity is at a four year low, but bankers in Calgary are staying busy working on smaller transactions.
The value of M&A in the sector globally now stands at $123.9-billion (U.S.) for 2013, down 31 per cent from last year and the weakest year since 2009, according to figures from Thomson Reuters.
After 2012's large transactions such as the takeovers of Nexen Inc. and Progress Energy Resources, it has been much quieter this year in the Canadian oil patch. There have been a couple of large asset acquisitions, but no really big takeovers.
Mike Tims, chairman of Peters & Co., a Calgary-based boutique securities firm that focuses on energy, pointed to a confluence of troubles. Oil sands costs have been high, oil prices have been low, especially for heavy Canadian crude, and buyers are being picky about acquisitions and looking at only the highest-return opportunities.
"So when you take all those factors and add in the transportation uncertainties, that is pipeline approvals we're waiting on, and new greenhouse gas emission rules … that is a lot of variables, just on the economic side," he told the Globe and Mail's Jeffrey Jones. Restrictions on foreign state-owned enterprises, unveiled in the wake of the Nexen and Progress takeovers, have also removed a type of potential customer.
So far, while 2013 is far from a record year at Peters, it's not the worst-ever.
Trading has been fair to middling, while the financing business has been slow. And M&A is stronger than it may look from a dollar-value point of view.
"When we look across our businesses, the merger and acquisition business and the asset acquisition and divestiture business are very active – not so much with very large deals, but just with a lot of transactions."
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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