By Bryan Livingston
Executive Vice President and Principal

It’s no secret that the domestic energy sector – especially drilling and production service firms serving the unconventional energy industry – has been booming for some time now. A recent triple play M&A deal of energy service firms might indicate that the segment has turned the page on a new chapter.

The deal Capital Alliance helped put together involved three production services firms merging into a new, much larger company. Part of the strategic rationale for the deal was that the new company, given the name U.S. Shale Solutions, could provide a more comprehensive selection of service offerings than the target firms could individually. For some customers, U.S. Shale will also offer more resources to handle projects of greater scope.

That value proposition holds several benefits for the very large exploration and production companies as well as larger midstream players. Large firms like these prefer to work with other large firms, like U.S. Shale Solutions. Part of this has to do with the notion of “one-stop shopping,” of course, but often large companies place so many restrictions on their suppliers that they effectively exclude many small firms from their supply chains. Many large companies find dealing with a supply chain made up of many small suppliers is inefficient. They’d rather deal with fewer large firms, unless there’s no other alternative. At the same time, larger suppliers are more appealing when project risk reaches a point where smaller companies have to think twice about accepting a contract.

So the question that comes out of this triple play deal is this: Has the unconventional energy services business reached a point where, to continue their growth, service providers should consider combining with each other or with a much larger firm?

The three services companies that combined to become U.S. Shale Solutions thought so.

To read our news release on this complex deal that took more than a year to complete, click here.