North Sea Upstream Change – Transaction, Transition & Integration

A result of recent economic challenges in the upstream sector has created a new wave of opportunity and optimism in the North Sea.  An increasing trend is becoming apparent where entrepreneurial smaller businesses are strategically acquiring assets or companies that are no longer deemed as core to business by their incumbent owners.  These owners are often larger organisations with their focus increasingly in other international basins.

This drive and aspiration to create longer term North Sea business opportunities is being led by impressive teams of industry veterans who have been successful in gaining financial backing to pursue their objectives.  What’s more, we are seeing greater private equity participation in this market.

Sets of circumstances can differ in each acquisition process.  The size and scale of each transition for example, will always vary.  The purpose for an acquisition will also differ from case to case – and so the practical requirements of integration can range from a “business as usual” approach to a radical need for widespread change.

Regardless of the status of change however, due consideration and attention needs to be given to each part of the acquisition transition process and road map to integration.

Depending on team size, outsourcing is often a realistic approach for many aspects of integration and transition.  The acquiring team will not always have the answer to each next step or challenge, so consulting experts with tried and tested experience may be crucial to meeting deadlines and the success of the project.

Through years of supporting North Sea transactions, AAB’s specialist Upstream Oil & Gas team has summarised three broad areas for consideration:

Transaction adjustments

Once a deal has been agreed, the effective deal date could be many months before all the transaction diligence and processes have been completed.  By calculating net revenues during this interim period, a positively significant financial balance can be achieved that can adjust the final deal price for the better.

Transition of payroll and benefits

When acquiring a new team as part of a transaction, it is important to put their concerns and needs high up on the agenda of change.  In some situations, there may be a feeling of loss of prestige, especially if coming from a bigger and more established brand and professional identity.  There may be uncertainty for the future, potential lack of knowledge of a new entrant and sometimes, resistance to change.  Mismanaging the transition of staff payroll and benefits, therefore has the potential to flare up unnecessary emotion and stress in the workforce.  Managing this well, and the workforce will not even know that changes have taken place.

Integration of people, processes and procedures

Effective integration planning and management will result in the successful transition of assets and personnel that meet or even exceed the initial reasons identified for the acquisition.  Careful consideration should be given to a unified purpose, combined set of values and organisational culture.  Successfully delivered, this will leave the combined group with a common purpose and a blue-print for future growth through acquisition.  Whilst many of these integration challenges are people related, the integration of operating systems, IT, financial accounting software and other business models is also of significant importance.

At AAB, our specialist teams span full lifecycle accounting, tax and consulting services that offer recent hands-on experience and tried and tested methodologies in many aspects of North Sea Upstream transaction and transition support, integration and programme management.

For more information please contact Alasdair Green or your usual AAB contact.

Find out more about our dedicated Corporate Finance team.