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Reality check: US M&A H1 2022

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US deal activity saw an annual decrease in H1 of this year, but remains buoyant compared to pre-pandemic standards

M&A proves its resilience after a year of excess

US M&A deal levels remain robust, despite dropping from historic highs set in 2021

US M&A activity eased off in the first half of 2022 following an annus mirabilis for US M&A in 2021. Total value slipped to US$995.3 billion, a 29 percent year-on-year fall, though this is consistent with dollar volumes seen before the pandemic and so remains healthy by historic standards. Deal volume also fell, by 21 percent to 3,818 transactions. While this also remains above average, there was a material softening in the frequency of deals moving through Q2, which saw a quarter-on-quarter drop of 22 percent to levels last seen in Q1 2020, when the market was just beginning to recover from the initial shock of the pandemic. 

A lot has happened this year to test acquirers’ nerves. Inflation concerns had already begun to set in before the war in Ukraine started. The conflict catalyzed further unease in capital markets as well as exacerbated supply chain troubles which have, in part, contributed to inflationary pressures. The S&P 500 officially entered a bear market in mid-June, and the Federal Reserve has embarked on a monetary tightening program to bring prices under control, leading to an increase in financing costs. 

Regulations are another consideration. The SEC has taken the SPAC market to task, proposing accountability for deal parties and intermediaries for inflated projections. This type of transaction ground to a standstill in Q2 this year, as participants digested their risk exposure and the implications of the regulator’s proposals weighing on overall M&A volume. More recently we have seen some truly innovative SPAC structures that have the potential to re-stimulate interest in these deals. 

For the most part, the US M&A market has stood up impressively to everything that has been thrown at it, which alone is solid grounds for optimism. Despite technology stocks being sold off heavily in equity markets, the sector has once again outperformed on the M&A front as companies and PE sponsors, who remain heavily armed with dry powder in spite of the more challenging deal financing conditions, continue to be attracted to innovation. 

The fall in price-to-earnings ratios in the public markets and EBITDA multiples in private markets mean that, all else being equal, acquisitions are more attractive today than they were a year ago. Naturally, investors remain cautious as they closely watch how inflation plays out, the Fed response and the impact of those actions on underlying economic growth. However, the second half of 2022 has the potential to reclaim some of the confidence lost in recent months.


US M&A settles back down

Deal value in the first half of 2022 could not match the record-breaking level of activity in 2021


Private equity firms battle headwinds in H1

Despite facing economic and regulatory hurdles in H1, PE dealmaking remains resilient, and looks set to reach its second-highest value on record

west village ivy building

SPACs are overcoming expectations

After a series of rollercoaster years for the SPAC market, investors and sponsors are finding ways to improve deal integrity

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In Focus


Oil & gas dealmaking continues to ride high in H1

A desire to consolidate and take advantage of relatively buoyant commodity prices is driving deals

3 min read

Dealmaking within the US O&G sector remained largely in line with H1 2021's strong activity, despite the ongoing challenges facing the industry. A total of 85 deals valued at US$44.2 billion were announced in the sector in H1— down 3 percent in value year-on-year, even as the number of deals ticked up by 9 percent. 

This stable deal activity is in contrast to overall M&A activity in the US, which saw drops of 21 percent and 29 percent in terms of volume and value, respectively, over the same period.

Consolidation on the rise

US$44.2 billion

The value of 85 deals targeting  the US oil & gas sector in H1 2022

The Centennial/Colgate merger will create the largest pure-play exploration and production Delaware Basin operator in West Texas and Southeast New Mexico. Oasis's acquisition of Whiting, meanwhile, significantly expands its presence in the core acreage of the Williston Basin, which stretches across western North Dakota and eastern Montana.

Consolidation was a major feature of the US oil & gas market in H1, as smaller companies found it harder to survive amid challenging market conditions. Two of the five largest deals of the year: Centennial's US$3.9 billion acquisition of Colgate Energy, and Oasis Petroleum's US$2.8 billion purchase of Whiting Petroleum, highlight the need to gain scale in a historically fragmented market.

The US domestic oil & gas market remains a fragmented market, and with volatility in energy commodity prices cooling down, further transactions are likely to take place in H2, with the potential for larger deals.

Take-private deals secure value


Percentage increase in deal value compared to H1 2021

The largest deal to take place in the sector was the Hamm family's proposed purchase of its remaining stake in Continental Resources, in a bid to take the US shale producer private. The move comes as US shale companies are reporting record cash flows after the war in Ukraine pushed up global oil prices. Similar deals could follow if companies do not feel that the public markets accurately reflect their current value. 

Greater stability brings confidence

While not completely immune to current economic volatility, energy businesses tend to react differently to downturns compared to the general M&A market. Demand for energy is usually resilient during downturns, and the steady returns energy assets offer are especially attractive to investors when growth is sluggish. 

While there was some volatility in commodity prices toward the start of the year surrounding the impact of geopolitical conflict, relatively stable commodity prices are bringing a greater sense of predictability to deal pricing. This ability to price deals, despite the uncertain geopolitical and economic backdrop, could set the scene for strong levels of M&A activity over the remaining half of the year.

Top oil & gas deals H1 2022

  1. Harold Hamm and his family offered to acquire an 18.71 percent stake in Continental Resources, the company he founded, for US$4.8 billion in order to take the company private
  2. Centennial Resource acquired Colgate Energy for US$3.9 billion
  3. Lucid Energy Group received a US$3.6 billion offer from Targa Resources

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