As we’re at OTC, it’s the time of the year to reflect on the outlook for UK/US cross-border transactions.
The majority of UK oil service businesses have been focused on overseas growth for years and this will continue to increase as international expansion is a key driver underpinning growth prospects, with the North Sea now classed as a mature region.
However, many of these companies perceive the US market to be very competitive and as such are more inclined to focus their growth efforts in developing regions such as the Middle East, Africa and the Far East.
What this does mean is that UK companies are extremely attractive to US corporates looking to expand their activities in the eastern hemisphere, as not only does it offer them a stronger presence in the UK, it is also likely to provide them with a foothold in other key oil-producing regions with many UK oil service businesses now generating over half of their revenue from international markets.
Our people and technology are deployed across the globe and it is that transportability which is attractive to US acquirers.
In recent months we have witnessed several US trade acquisitions of Aberdeen-based businesses including the acquisition of downhole completion equipment specialist Zenith Oilfield Technology by Lufkin Industries for £80million and the purchase of rig-cooling service provider Optima Solutions by Tetra Technologies for £40million, and there will be many more similar transactions completed during the rest of 2012.
There also continues to be significant interest in the UK from US private-equity investors, with energy-sector specialists such as SCF Partners, Lime Rock Partners and Intervale Capital looking at platform and bolt-on acquisition opportunities in the UK.
SCF-backed Forum Energy Technologies and Reservoir Group have been particularly active in the past 12 months with both completing several cross-border deals. There is no reason why the strong interest being shown Stateside in acquiring UK energy service firms will not continue.
Mike Brown is head of corporate finance with Anderson Anderson and Brown