By Mike Brown, Head of Corporate Finance, Anderson Anderson & Brown LLP

There is a growing hunger and desire for increasing cross-border mergers & acquisitions (M&A) activity in the energy sector globally but as we’re at OTC in Houston its the time of the year to focus on the potential for UK/US cross border transactions.

The oil and gas sector has enjoyed increased M&A activity in the last 12 months, as oil prices have rebounded and credit markets eased slightly.  The major global oilfield service companies, many of which are headquartered in the US, are actively looking to pursue M&A opportunities with many sitting on significant cash reserves.

There is a huge appetite being shown by US energy service companies in their UK counterparts, as recently witnessed for example by GE Oil & Gas's announcement of the proposed acquisitions of Wellstream and the Well Support division of Wood Group.

Many of the US based energy equipment and service companies are continuing to invest heavily outside the US to further develop their product/service offerings and increase their presence in key oil-producing regions.

UK companies in the Oil and Gas service sector and in particular those in the North East of Scotland are tremendously innovative and as such are attractive to US acquirers looking to expand their activities in the Eastern Hemisphere. Our people and technology are deployed across the globe and it is that transportability which is attractive to acquirers as these companies have the capability to internationalise and as such deliver real value to their customers as well as their shareholders.

There also continues to be significant interest in the UK from the US private equity investors -  for example the significant recent merger of five portfolio companies of SCF Partners to form Forum Energy Technologies included Aberdeen-based Triton Group and the new combined group are currently pursuing a number of bolt-on acquisition opportunities in the UK.

The majority of UK oilfield service companies have also been focused on overseas growth for a number of years and this will continue to increase as international expansion is a key driver underpinning growth prospects with the North Sea now classed as a mature region.  However many UK service companies perceive the US market to be very competitive and as such are more inclined to focus their growth efforts in developing regions such as the Middle East, North and West Africa (albeit the recent political and more significant problems in countries in this region are bound to impact negatively) and the Far East and as such there tends to be less M&A activity involving the purchase of US companies by UK trade players.

From a M&A perspective the greatest potential lies with matching the US trade players and private equity investors looking to expand in the Eastern Hemisphere with appropriate target businesses in the UK; our people and technology are what is attractive and there is no reason why the big appetite being shown by US service companies in their UK counterparts will not continue to be the case for the foreseeable future.