Large-cap M&A appetites 'on the rise'

Rising confidence: North America leading global rise in energy M&A appetites

The world’s largest corporate energy companies are seeing forward price-to-earnings ratios rise faster than most other industry sectors, suggesting increasing appetite for mergers and acquisitions activity, a new global analysis has said.

KMPG’s study of 125 of the world’s largest energy companies suggested that P/E ratios would jump by 25% for the 12 months to 30 June 2015 compared to the 12 months to 30 June 2014, the second highest of any sector studied after  basic materials (26%) and followed by technology (21%), utilities (19%) and telecommunications (17%).

The same timeframe is forecast to see a 2% rise in net profit for the global energy players and a 6% rise in ebitda, while the net debt to ebitda ratio will decline by 1%.

Consensus forecasts for the energy companies’ P/E ratios were at 9.2 for the 12 months to June 2014, rising 15% to 10.6 for the 12 months to December 2014 and rising another 8% to 11.5 for the 12 months to June 2015, KPMG said.

Regionally, North American energy players’ P/E ratio was strongest for the 12 months to June 2015 at 15.9, followed by: Africa and Middle East (10.8%); Japan (10.2%); Asia-Pacific (9.7%); Latin America (8.8%); and Europe (8.4%).

KPMG said on an economy-wide basis the strong appetite and increasing capacity to make M&A moves were still not translating into deal completions, which continued their downward trend over the first six months of 2014.

Within Upstream, M&A deal tallies rose significantly in the first half of 2014 to about $100 million, recent reports from Deloitte and Derrick Petroleum Services indicated.

North America made up the bulk of the funds flow, with conventionals accounting for the majority of the outlay as the shale rush cooled.

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