Transaction professionals have lowered their short-term expectations for middle-market M&A in the energy sector significantly since the last time we looked at the sector in mid-2014, according to Mergers & Acquisitions’ Mid-Market Pulse (MMP), a forward-looking sentiment indicator derived from monthly surveys of approximately 250 executives and published in partnership with McGladrey LLP. (See related graphic.)
The 3-month score of 49.4 ranks far below the 77.5 score for overall M&A in the short term. It’s also significantly lower than the 3-month score of 68.5 that the sector garnered previously.
The 12-month score of 62.4 showed dealmakers predict healthy growth over the next year, but it still lags the 72.7 score for overall M&A in the longer term. Previously, the 12-month energy composite score was 67.7.
The decline in oil prices is likely taking a toll on short-term assessments of the sector. Reflecting the more bullish longer-time view, however, new energy funds have already been raised in 2015 by private equity firms, including EIV Capital, Five Point Capital Partners and NGP Energy Capital Management.
Among the six fast-growth industries measured by the MMP, for the 3-month outlook, health care is the fastest-growing sector for M&A, according to the MMP. For the 12-month outlook, the most robust sector is currently financial services, insurance, and real estate (FIRE). The technology, media and telecommunications (TMT) sector came in second place for both timeframes.