Energy sector to lead M&A revival in 2014, according to Hogan Lovells research

The energy sector will play a leading role in the global M&A revival, with energy firms significantly more favourable towards M&A than companies in other sectors, according to wide-ranging research carried out by Hogan Lovells.

The research — which examined the views of 40 senior executives across oil and gas, traditional power and renewable energy companies, as part of a broader survey of business executives across six sectors — reveals that:

  • Energy sector executives are more positive about the potential of M&A than their peers in any other sector, with almost nine in 10 executives (85 per cent) considering M&A to have delivered what they had hoped for in the past (against three in four executives across other sectors);
  • M&A activity will be funded by existing cash resources, with 73 per cent of company executives suggesting they would use cash on balance sheets to fund M&A growth within the next 24 months — 175 energy companies globally are estimated to have held $850bn (£509.3bn) in 2013 (a 13 per cent increase on 2012); and
  • Almost three in four executives (68 per cent) see the changing regulatory landscape as a key driver of growth for their business.

The findings also reveal that the shape of this renaissance will be more ‘strategic’ than in the past. Sixty-two per cent of respondents would seek joint ventures to fund new technology projects and to tackle capital-intensive developments (such as fracking), reflecting how company boards are seeking more long-term partnerships.

Steven Bryan, corporate energy partner at Hogan Lovells, said: ‘Our research shows that the energy sector will be a driver for the global M&A recovery, with the optimism of executives in the energy sector at a high level. 

‘Company executives are not only positive about M&A and its past success, but have real confidence about the outlook for the future and the role that M&A can play in driving future growth.’