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DW Monday: Avoiding the M&A Fire Drill

By November 4, 2013September 7th, 2022No Comments

DW MondayIt’s a familiar pattern: a friendly banker calls a CEO and says “Oilfield Service Company XYZ is for sale.” After a mad internal scramble involving far too much time and effort the target is abandoned, likely for reasons that easily could have been seen at the outset. As a result, efforts to grow via M&A have stalled. Specifically:

  • Companies want to enter other related areas in OFS, but lack a specific plan to target individual segments, priorities and sequencing
  • Opportunities arise but timing is almost always awful, when the core business is extremely busy
  • Senior executives spend lots of time talking about the target, its segment, competitors, etc. – all to conclude it isn’t a fit after all
  • Executives understand their core area of the OFS industry, but knowledge of others is limited
  • Companies spend too long on small $5-10 million M&A opportunities but not enough on targets in the correct size range

The costs of this process are enormous as senior management time is wasted on fruitless meetings and analysis, and earmarked capital lies uninvested. Corporate visions of developing a defendable position in OFS seem ever more remote.

Much of our work is in helping OFS clients address these challenges. In our experience three steps help move OFS M&A plans forward:

  • Step 1: develop an informed view of specific OFS segments, then list which might fit best with the firm’s overall strategy
  • Step 2: for the top-priority segments, analyze specific M&A target companies, then screen and rank them
  • Step 3: for a specific transaction, conduct in-depth market due diligence to complete deals faster and at a better price

R. Michael Haney, Douglas-Westwood Houston
+1 713 385 2588 or [email protected]