AWE’s board has backed Mitsui’s $602 million bid for the Perth Basin gas operator, which was the subject of a heated bidding war in January. Image: AWE.
BY REUBEN ADAMS
GLOBAL M&A value more than doubled in 2017 to $US345 billion fuelled by higher oil prices, plentiful financing and a strengthening global economy, according to a new report.
The Global Transactions Forecast by Baker McKenzie also predicted M&A deal values would peak at $US353 billion in 2018, before cooling in line with a slowing of global investment growth as borrowing costs rise in key economies and stretched stock market valuations start to soften.
“There’s an expectation now that oil prices won’t go below $US50 barrel, up from lows of $US25 to $US30 a barrel in recent years,” Global Energy, Mining & Infrastructure Industry Group chair James O’Brien said.
“It may not be $US80 or $US100 a barrel like it’s been in the past, but it’s sufficient enough to drive deals.”
In Asia Pacific, the report forecast energy M&A values to rise nearly 25 per cent over the next two years, from $US43.6 billion in 2017 to $US53.2 billion in 2019. Chinese spending, bolstered by appreciation of the yuan and the Government’s ambitious Belt & Road initiative, was expected to be a driver.
“If oil prices continue to rise, it’s likely to kick-start development of the projects that have been put on hold because of low oil prices,” says Martin David, co-chair of Baker McKenzie’s Global Power Industry Group.
“We will also likely see a rise in M&A activity in the upstream and mid-stream sectors.”
EY’s global oil and gas M&A outlook was also optimistic, with upstream deal value predicted to increase 30 per cent year-on-year.
“Risk sensitivity and a continued focus on internal performance improvement may have delayed the uptick in deal volume we expected in 2017,” EY Global Oil & Gas transactions leader Andy Brogan said.
“But the need to demonstrate appropriate returns is now pushing companies to reposition their portfolios and seek economies of scale, which in turn we anticipate will underpin more M&A activity in 2018.”