Cracking the Energy Code
It’s been said that private equity has a crush on technology, but look a little closer. There’s another sector that’s become an unexpected object of PE’s attention (and investment): Energy Services. The dynamics at play in the energy services space have brought a host of non-industry suitors to the market. Ironically, the opportunities they’re attracted to are the very same conditions services companies are struggling with: volatile commodities and technological disruption. Sector volatility has placed a priority on working capital visibility during both the downside and upside of a cycle. Investors get downright giddy about automation, process and operational improvements that will not only yield better working capital visibility but create real value prior to exit.
“Giddy” wouldn’t be the adjective we’d assign to the companies themselves, which exist in an industry inexperienced with (though not unexcited by) process efficiency and automation. These are the people that must execute on sponsor demands for enhanced budgeting, forecasting and KPI reporting, and they must do so within the context of constant consolidation fueled by build or buy geographic expansion.
Where We Play
At Accordion, we understand the nuanced and volatile market in which our energy services clients operate. We also understand that sponsors investing outside of their comfort zone (at least from an industry perspective) have an even greater need for their finger to be on the pulse of the business. And, we understand the push-pull dynamic between that fund sponsor and their energy services portfolio company – and we can help. We can support the type of enhanced analytics that help companies better expect (and more effectively ride) the waves of volatility. We can help support the Finance team in their process and operational improvement efforts and other value creation levers. And, we can help support ‘buy’ geographic expansion initiatives whether they’re rolled up, carved out, added on, or integrated in. There’s a sector-specific code to energy – we help crack it.
Although we’ve seen major cyclicality in recent years, energy services companies remain prime targets for private equity firms as domestic infrastructure investments create a tailwind which could last another 10-15 years. The market will be ripe for new platform development and bolt-on opportunities in areas characterized by local/regional fragmentation.