The boss of Simmons & Co said he expects to see more mergers and acquisitions in the next year, as he spoke about his own company’s $139million takeover by Piper Jaffray.
The companies announced in a joint statement yesterday they had signed a deal for the merger after detailed talks intensified in the past four weeks.
Speaking exclusively to Energy Voice, Colin Welsh, who heads up Simmons’ business in the eastern hemisphere said he also expected the oil price to pick up.
He said:”I don’t think we’ve seen as much mergers and acquisitions.I think activity has slowed down over the course of the last six months. I would expect actually that activity in the first half of 2016 will actually be up on the past six months in terms of M&As.
“I would have thought in the first half of 2016 there will be more M&A activity than in the last half of 2015.
“If we want to develop the business either geographically or functionally in terms of developing the activities that we have here then, you know, they’re very well equipped to provide that.
“Historically that’s more of a difficult thing to do when you’re working in a smaller organisation that’s private.
“My personal view is that crude prices will strengthen through 2016 and the first area you’ll see that impact is the US shale market, the next area you’ll see coming back is the shallow water offshore market and, you know, because the UK North Sea is one of the most expensive areas I think that is probably reasonably down the queue in terms of what recovers the fastest, the quickest.
“Having said that I see there being two bright spots. The first is that I’m a big believer that necessity is the mother of invention and as the big oil companies begin to divest their assets, I think there will be companies who can fill that gap, because there is plenty capital looking to invest in opportunities in the exploration and production market.
“The second bright spot is the oil service industry which certainly here is a global industry so it’s not entirely leveraged to the North Sea.
“I think the services business here will definitely see an uptake. I think 2016 will be difficult for the service companies but I think with the crude price increasing, hopefully that feeds into activity, particularly in 2017.”
Piper Jaffray said the value the deal was around $139million, which will consist of $91million in cash and $48million in restricted stock.
A further $21million has also been committed by the company in cash and stock for retention purposes.
Welsh said the true value of the deal would not fully become apparent for the next two to three years.
He said Simmons shareholders would also end up with a meaningful stake in Piper’s business too.
Welsh added: “It wouldn’t have been any good for us if we had got swallowed up by a giant investment bank that was driven out of New York because the culture that’s in those investment banks is very different to the culture in our business.”
The deal between Simmons and Piper Jaffray – which is four times the size of Simmons – will still leave the company in charge of its business.
A factor which Welsh said was essential to striking a deal with the Minneapolis-based company.
He said:“The firm has been looking for a deal for a while and we wanted to kind of organise a deal whereby we could sort of facilitate the exit of some of our very senior partners.
“The older partners, some of whom have been around since the start pretty much, 40 years ago.
“We wanted to also have that deal result in us still being in charge of our business. We wanted to preserve the culture and the things that are unique to Simmons- which is our industry specialisation and the culture and the experience and the client focus etc.
“Actually funnily enough, the guys at Piper Jaffray have been speaking to us for many, many years because I think we have always been on their radar screen.
“It only really got serious over the course of the last six months and it only really started getting into detailed talks over the course of the last four weeks. The deal has been pulled together very quickly.
“It was really kind of a bit of both I think once we had made the decision to explore options they were obviously one of the first people we thought about getting back to because they had kind of kept close to us over a number of years.
The move means Welsh will become head of international energy investment banking and executive chairman of Piper Jaffray’s UK subsidiary.
He will also continue to lead Simmons’ international activities.
Meanwhile Piper Jaffray will continue to operate the business under the Simmons brand as a Piper Jaffray company.
Welsh added:”I’m super happy about it because basically it’s like having your cake and eating it really. The ability to transition the business, the reality is that it’s a good time for change and it’s a great opportunity for us to move the business forward with partners that are very supportive of what we’re trying to do and who, candidly, have no desire to interfere with how we do things unless they think it’s going to improve the business.
“It’s nice to be able to do that. The plans here are to continue to develop the business. We’re busy at the moment and we’re working on lots of projects.
“In the short term we want to get as many of those projects over the finishing line as possible and in the longer term we would like to continue to develop our activities in the Middle East and in Asia and in Australia because a lot of our backlog comes not just from Aberdeen, not just from the UK but from those regions as well. And we want to continue developing our business in that way.
“This deal kind of positions us perfectly to do that.It really is just business as usual.”
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