Oklahoma Merger & Acquisition Update

The M&A market in Oklahoma has felt the effects of the roller coaster ride that oil has steadily been a passenger on for the past 18 months, but transactions continue to close across a wide variety of industries. That said, the natural resources native to the region have certainly been a key source of transaction activity.

Cases in Point

Back in October, Tulsa-based Casillas Petroleum Resource Partners, LLC acquired the oil & gas assets of Continental Resources, Inc. for US$294 million. The acquisition enables Casillas Petroleum Resource Partners to expand its footprint in the region. The assets acquired were all located in Oklahoma. In June of this year, Triumph Energy Partners, LLC acquired assets related to oil and gas fields in the Sooner Trend Anadarko Basin Canadian and Kingfisher counties (STACK) for US$74.5 million. The assets acquired included approximately 8,000 net acres and 5 million cubic feet of gas equivalent per day of net production in Oklahoma.

This past May, Tulsa-based SemGroup Corp acquired the remaining 43.8% stake it did not already own in Rose Rock Midstream, LP for US$440.7 million in stock. Under the terms, Rose Rock Midstream would receive 0.8136 share of SemGroup per Rose Rock Midstream share held. The consideration represented a 7.4% and 19.2% premium to the target's volume-weighted average prices during the 10-trading days and 20-trading days ending May 27, 2016, respectively. While the local energy sector generated significant transactional value there were a number of other smaller, local deals closed in other industries. In October, Edmond based Healthcrest Surgical Partners, LLC acquired Foundation Surgery Management LLC from Foundation Healthcare, Inc., a subsidiary of Foundation Healthcare Affiliates, LLC for US$5.3 million in cash and promissory notes.  The deal enabled Healthcrest Surgical Partners to increase its ambulatory surgery center locations to seven.

Also in October, Oklahoma City based Enerlabs, Inc. acquired Energy & Environmental Services, Inc. for an undisclosed amount. Enerlabs operates as a management company with the purpose of acquiring, merging and operating analytical environmental and energy testing laboratories. Energy & Environmental Services manufactures and packages custom liquids and solid chemicals. With the Trump administration set to take office in January many believe the effects on M&A will be positive. After all, the President-Elect is a well-known deal maker. In addition, his pro-drilling and anti-regulation stance is expected to boost the fossil fuel economy, which could have a significant impact on Oklahoma businesses. Many U.S. shale producers are already redeploying rigs, spending more cash and hiring more workers, exhibiting a cautious optimism as we head into 2017.

So, while a recovery in the oil and gas space continues to build momentum, many business owners in the sector that expected to exit in 2015 or 2016 may see the uptick in 2017 that boosts values and delivers the multiples they aim to achieve. The question remains whether to realize those gains within the business or start the business exit process sooner than later. With key industries positioned for growth and a generally healthy middle market M&A sector Oklahoma business owners should consider leveraging the expertise of experienced M&A advisors who have proven to understand the specifics of the local market - best positioning themselves for success in 2017.