PwC US: Energy and Power Business Combinations Stronger in 2010

Lucas Gilmore, “Big 4″ observer
December 10, 2010 /

Despite the seemingly scarce opportunities in deal making, the US arena for business combinations in energy and power sector has seen stronger growth in 2010 propelled by the emergence of the capital market, paving the way for a better future of deal making in 2011, PricewaterhouseCoopers USA said.

PwC said trades in shale over the last three years have set the initial steps towards increasing asset transactions, making companies to shift their business combinations interests on developments of shale wells created by small equipment and service providers.

Transactions in power plants that aim to enhance share value and buy rather than build facilities in some areas will be driven by continued consolidation and low valuations, PwC added.

Martyn Curragh, leader of PwC US Transaction Services, said companies responded to the economic challenge in the past 18 to 24 months by diverting their business combinations interest to include cost structure improvement. He added that generating revenues drove these companies to redirect their attention from recovery to growth in business combinations as 2010 turns, with the help of stronger credit and equity markets.

Energy and power, among other sectors, contributed to the growth of deal value, which increased from $722 billion in 2009 to $786 billion in November 2010, levels last seen in 2003 and 2004, said Thomson Reuters, which previously joined PwC.

According to PwC, business combinations volumes have increased within 12 months ended November 2010 due largely to improved capital markets, firm prices, and available debts, factors that have made financial terms attractive to private equity buyers.

For the first time in a long while, Curragh said, this trend provides opportunities for companies to “generate cash at higher multiples while strategically divesting of certain assets.”


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