Oil And Gas M&A

Reasons for Oil And Gas M&A

Whether it is renewable energy or new sources of oil and gas, finance is one big game changer. The reason for this is that these are sectors which soak up a lot of money. The first thing that needs to be done is to prospect for probable sources of energy. This involves thousands of soil tests and lots of calculations and also a humongous amount of samples. All of this requires a lot of infrastructure equity funds. Even if a company is willing and able to cough up that kind of money, there is no guarantee that all the exploration will be successful. Many such efforts might draw a blank.

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When a prospective location does show signs of providing a sustainable energy source, it might not become profitable immediately. That is because the extraction and refining facilities will need to be set up. That will again take several years and also a good amount of money. Only after that critical mass is reached will the venture begin to generate revenue and profits.

Because of these reasons, a company which is into oil and gas needs to have really deep pockets. But if that is not the case, and there are shortages of funds, then renewable energy project finance or renewable energy finance is needed. But if that too is not forthcoming, then the best way out is oil and gas m&a. This is when one bigger company takes over a comparatively smaller company (also called an acquisition or takeover) or two companies merge together to form a new company. There are several advantages to this kind of activity. The new entity would be eligible for several tax breaks, and there would be operational efficiencies in exploration, extraction, and refining. There would also be possible advantages in logistics.


The process of acquisition, divestment or merger is a long drawn out process. Both companies involved in a merger need to find out about each other in detail and work out the financial and other implications. If an acquisition is taking place, then the acquiring company needs to be very sure about the financial condition of the company that is being taken over, including financial liabilities if any. For a divestment too, the purchasing company needs to be sure if the assets being purchased make financial sense or not. There are reputed companies like Kapok Capital which would be able to all the due diligence for all such M&A activities.

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