M&A to Rise as Majors 'Drill on Wall Street': Analysts
Staff Writer, CNBC.com
The global market for mergers and acquisitions (M&A) has been stagnant for much of the year as nervousness about the future of the markets has grown and borrowing has become more difficult.
Yet analysts believe that in certain sectors, particularly commodities and utilities, the M&A market will pick up again soon as companies have conserved cash.
Major companies that are "struggling with growth are having to drill on Wall Street," Stuart Joyner, Oil & Gas Analyst at Investec, told CNBC Tuesday. "The explorers have been hit this year as people have taken risk away. There's a lot of value there and we are starting to see bids."
Norwegian Statoil said Monday that it will pay $4.4 billion for Brigham Exploration.
Earlier this month, it was announced that British oil producerPremier Oil will buy North Sea-focused Encore Oil
for 221 million pounds ($340 million).
Of course, M&A is also an important way for Western companies to expand in higher-growth emerging markets, if their traditional markets remain stagnant.
"The deleveraging West can't find organic growth like it did in the 1990s," Andy Hartwill, market strategist at Quasar Financial Research, told CNBC. "The only avenue for them for future improvement is more consolidation."
Big miners have suffered share price dips in recent weeks as worries about another recession and Chinese consumption have grown.
There are also fears that the price of copper may fall after it emerged thatChinese copper inventories are higher than expected.
"I suspect that the pull-through from China will be there," said Hartwill. "The M&A story will be exactly as it was in the mid-90s. As miners start to pull back on capital expenditure, then we start to see consolidation. There's plenty of firepower for that consolidation to happen."