The New York Times recently covered a story in the energy sector dealing with a current acquisition. The article discussed the larger issues that are currently plaguing the energy industry but it also spotlighted Energy Transfer Equity’s acquisition of the Williams Companies.
Energy Transfer Equity’s Chief Executive Officer, Kelcy Warren, wanted to grow his already 71 thousand mile pipeline network. He thought the best course of action was to purchase another company that already had a network of gas and oil pipelines. The immediate choice was the Williams Companies. Warren approached the board of the Williams Companies and made an offer to purchase the company. The board rejected him but he did not give up. He came back with an even higher buying price and the board agreed.
However, this agreement was not unanimous. The decisions was almost split, with some wanting to grow the company to increase the value of the stock price and others wanting to see the company. Alan Armstrong, the Chief Executive Officer of the Williams Companies, has been supportive of the deal, but only publicly. He has been caught saying things in private that indicate he has negative feelings about the deal. There are even rumors that if the deal goes through, Armstrong will leave.
The larger aspect that was discussed in the article is the crisis currently effecting the energy sector. There has been a big drop in energy prices, including oil and natural gas. While the article did admit that that is great for consumers, it is causing great distress in the energy industry and the banking and investment world.
The article goes on to explain that many energy companies have taken out large levels of debt that they thought they would be able to pay off at where prices were. When the prices dropped, no companies were prepared. It is very likely that about a third of the companies in the companies that provide services in exploration and production will file for bankruptcy. Even some of the larger companies are laying off employees. On an even larger scale, JP Morgan Chase was forced to increase its reserves because of bad energy loans.
One of the firms watching this situation unfold is Madison Street Capital. This investment banking firm specializes in middle of market companies. The provide an array of services from asset management industry focus and business valuation to corporate advisory and valuation fro financial reporting. The firm was founded in 2005 and has offices on 3 continents. One of the areas that Madison Street Capital is best known for is their services in mergers and acquisitions as well as successful capital raises.