The novel coronavirus pandemic has had a substantial impact on businesses across Texas, including on merger and acquisition (M&A) deals in the Texas oil and gas industry. With some careful foresight and wise planning, entrepreneurs either currently involved in or looking to become invested in this marketplace can strategically navigate the situation and structure a successful deal.
Two ideas to help facilitate successful M&A deals
Some tips to help better ensure such success include:
- Reconsider closing deals. It may be wise to consider earnouts or contingent payments when structuring a M&A deal in the current marketplace. This will allow for more financial security for a buyer who may be hesitant to go in for a full buy due to the many uncertainties of our current situation.
- Reevaluate due diligence. The due diligence process will take on additional burden during the COVID-19 pandemic. It is important to look into how the previous company has handled stay-at-home orders and tax incentives. Federal limitations may be present if the previous owners took certain loans. As a result, it is important to have this information and respond appropriately to reduce the risk of unexpected penalties once the deal is complete.
Analysts within the state’s oil and gas market predict the future to hold an increase in consolidation. This can provide an opportunity for those with the funds and liquidity to gather momentum within this market in coming months.
However, it is wise to do so with strategic planning. An attorney experienced in these deals and the workings of local laws can provide counsel and mitigate the risk of surprises once the deal is finalized.