More uncertainty for dealmakers: M&A trends in ENRC

Deal volume and value for the ENRC sector declined across Q3’22. The same factors seen in Q2’22—inflation, the Russia-Ukraine war, rising interest rates, and supply chain disruptions—continue to soften the deal market and make even well-established players take a more cautious stance about both buying and selling.

Market uncertainty favored strategic deals in Q3’22, but the O&G subsector might see a resurgence in deals over the next several quarters because many O&G companies funded between 2014 and 2018 are now of a vintage that makes them a strong candidate for market sales.

To help support value in today’s M&A deal markets, KPMG professionals recommend dealmakers to consider the following:

• Sellers need critical differentiators to achieve maximum valuations and enhance their exit options. Differentiators might include exclusive or inhouse developed software, patented equipment and processes, or exclusive long-term contracts.
• Buyers need to know the target’s ESG exposure and benefits of current operations, including total carbon footprints and plans for lowering carbon emissions.
• Management teams need to monitor costs, mitigate the effects of inflation, and develop executable plans for hiring in tight labor markets.