Why is Texas M&A Different?

The climate for M&A in Texas, while for the most part in accordance with the greater M&A market in the United States, definitely has some particular characteristics of its own. This, of course, relates to the region’s strong ties to the energy sector. After all, Texas is this country’s home for the oil and gas sector and also has a strong footprint in alternative energy sources like solar and wind power.

M&A in the sector of late, in Texas and beyond, has returned to a rather strong pace tallying the highest deal value and deal volume since 2014, according to data published by The Oil and Gas Financial Journal. This can be attributed to a number of factors.

As oil prices have slowly ticked up, private equity buyers have gotten up off the sidelines after waiting in the wings for prices to reach what appears to have been a bottom. On the public markets, there are still plenty of opportunities for large strategic companies to snatch up strong assets at reasonable valuations. On the supply side of the sector, buyers are happy as there are plenty of companies that survived the pricing pressure and are now looking to join forces with entities that have stronger balance sheets.

As a seller in this sector, there will be plenty of suitors looking to grow their positions in the market by acquiring companies like yours. If your company is well positioned and well presented, this is a good time to create an auction environment to drive up your value.

One of the largest Texas deals recently announced was Dallas-based Energy Transfer Partners LP (NYSE: ETP) announcing plans to buy the general partner of Houston-based PennTex Midstream Partners LP (Nasdaq: PTXP), along with certain other interests, for about $640 million.

Another Texas sector that has seen M&A activity pick up is banking. According to an FDIC report released at the end of August, loans and leases for community banks are up 9.1 percent over the past 12 months. As banking continues on a stabilization path M&A activity is likely to follow.

In June, Sherman, Texas headquartered American Bank of Texas announced a $2.3 billion merger with First United Bank and Trust Co. Back in March, a smaller deal was announced when College Station based Spirit of Texas Bank acquired a branch from PlainsCapital Bank.

For the remainder of 2016, the experts expect M&A activity to increase as the uncertainty of the impending election takes a seat in the rearview, and the ambivalence in the air that surrounds a change of the guard is put to rest.

However, as always, no matter the political climate or the sector of the business there are always willing buyers looking to acquire strong profitable middle-market companies. Corporate balance sheets are still rife with cash and private equity has its fair share of dry powder waiting to be invested in the right assets.

If exiting your Texas-based business is on your radar, be sure to work with an Investment banker or M&A advisor who specifically understands the nuanced nature of the Texas M&A market - there is a difference!