The oilfield service segment is an attractive arena for private equity companies to find acquisition targets due to high levels of innovation and associated growth potential. Rystad Energy was approached by a private equity company targeting a candidate that already was marketing itself as an acquisition target. The key question for our client was how much they were willing to pay for the candidate, with underlying questions on domestic and international market potential as well as current technological and commercial standing of the target.
Rystad Energy chose a two-folded approach for the task. First, by leveraging in-house databases, the team purpose-built a model to predict future demand for the service niche. This constituted the quantitative part of the project and provided fundamental input to the client’s own valuation models. Secondly, the team carried out an extensive qualitative review of the targets position and the service niche itself. This included a substantial number of industry interviews, and learning was constantly fed back into the numerical model. Competitor standing, likelihood of a successful internationalization of the business as well as a technology assessment were central parts to this exercise.
The Rystad Energy team maintained a running dialog with the client throughout the due-diligence process as well as through the bidding process. By complementing in-house competence with industry learning through interviews, the Rystad Energy team was able to quickly understand the niche and educate the client effectively. The client’s apparent competence level became a pivotal value proposition towards the target, and the client ended up as a winning part in a fierce competition for the acquisition.