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Jan 18
2011

Oil & gas, technology are ripe for consolidation

Posted by dbedell in mergers and acquisitionsDeals

dbedell

M&A could see a significant uptick this year as sectors such as oil and gas, technology, and healthcare lead the way, according to Steve Krouskos, Global and Americas Markets Leader for Ernst & Young's Transaction Advisory Services.

US companies were responsible for $773 billion in M&A volumes in 2010, according to the Thomson Reuters full-year 2010 Mergers & Acquisitions review—an increase of 11% over 2009. This represents just a third of global M&A activity for the full year, however, which totalled $2.25 trillion, according to the Thomson Reuters review.

The emerging markets once again dominated M&A activity in 2010, according to the data.

Kouskos at Ernst & Young predicts a bumpy ride as the year begins: “I think it will be an interesting year. I do expect to see a pick up, although it will be a bit of a bumpy pick up until we see a fully-fledged return of confidence.”

The tech sector looks set to see more consolidation, as companies continue to make acquisitions outside their specific market space in order to expand their product offering and geographic footprint. Kouskos says: “These are companies with a lot of cash on balance sheet.”

Energy will be another area that is likely to see increased activity. “The uptick in oil prices is driving activity in the upstream space,” says Kouskos. “And certainly utilities that are stronger will take advantage of those with weaker valuations. So we expect to see more consolidation in that space.” For example, there is Duke Energy’s $13.7 billion acquisition of Progress Energy, which was announced this month.

Finally, the healthcare sector could see some M&A activity with companies looking to take advantage of the increased volumes of insured patients as the new healthcare regulations take hold. Plus, notes Kouskos, consolidation in healthcare will be driven by the desire to reduce costs and consolidate back offices.

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