Texas M&A activity rockets to new highs

Mergers and acquisitions in Texas rocketed to new highs during the first half of 2022, eclipsing the record deal counts of both the first and second half of 2021. The dollar value of those transactions, however, declined significantly from the year because of a dearth megadeals by corporate giants such as AT&T, Chevron or Match.com, according to statistics gathered by the Texas Lawbook. Companies made 507 M&A transactions during the first six months of 2022 compared to 477 for the first half of last year. M&A activity in the first half of the year easily outpaced pre-pandemic levels, jumping 75 percent from 289 deals in 2019. Eric Otness, a partner at Skadden Arps in Houston, said 2021 was such an “incredible year” that dealmakers did not expect 2022 would keep up.

Corporate lawyers attributed the heated M&A market in Texas to multiple factors. Interest rates, while increasingly slightly during the first half of the year, remained historically low. The energy sector, boosted by rising commodity prices, bounced back, accounting for about one-third of the Texas transactions and nearly half of the total deal value during the first six months of 2022. And businesses in the middle and lower-middle market — sparked by private equity funds — hit record highs in dealmaking. Debbie Yee, a partner at Kirkland & Ellis in Houston, said that consolidation in the oil and gas industry is continuing at a moderate pace, with public companies continuing to look at acquisitions of private companies to increase scale, free cash flow and shareholder returns. “We are seeing significant financial investor interest in real assets, conventional energy and renewable and energy transition assets,” Yee said. M&A activity, however, trailed off during the second quarter of 2022 as interest rates began to rise. The number of deals feel to 225 in the second quarter from 282 deals in the first. Energy transactions (energy and mining) accounted for the lion’s share of deals at 32 percent followed by technology (12.8 percent), manufacturing (8.1 percent), health care (6.3 percent), business services (5.5 percent) and financial services (3.7 percent).