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As we had long forecast, the higher central banks raise interest rates, the lower the Merger and Acquisition trend… which hit record highs at the height of the COVID War in 2021 when interest rates sank and governments pumped in countless trillions to artificially prop up sinking economies.
And as we have continued to detail, it is important to understand that M&A activity will continue to slow down as interest rates remain high. But as economic conditions worsen there will be more corporate defaults. This will bring revenues of struggling companies down, making it cheaper for the “Bigs” to buy out those in economic distress. This in turn will continue to shrink the competitive landscape in many business sectors. This is the latest “Big” takeover.
PIPELINE COMPANIES UNITE IN $7-BILLION DEAL
Energy Transfer and Crestwood Equity partners, two Texas pipeline companies, have joined into one in a deal worth $7 billion in stock.
Crestwood’s stockholders will receive 2.07 shares of Energy Transfer for each Crestwood share. Crestwood’s current shareholders will own about 6.5 percent of Energy Transfer when the deal closes late this year.
Crestwood has pipes in North Dakota’s shale-heavy Williston Basin and the Powder River Basin spanning Montana and Wyoming. Buying Crestwood gives Energy Transfer a larger presence in Williston and expands its footprint in the Permian Basin of West Texas, where Crestwood also has an extensive network.
The deal is part of a wave of consolidation in the American oilpatch.
The shale boom has matured into an industry defined by modest investment and rich dividends to investors. Companies have little appetite to drill or explore, leaving buyouts as the easiest way to gain the efficiencies that come from expansion.
The same is true in the pipeline business: with few new oil fields coming into production and with production set to decline in the future, size will define survival for many companies.
In May, pipeline operator Oneak agreed to pay $14 billion for rival Magellan Midstream Partners.