After years of job growth and a rising consumer confidence throughout Texas, mergers and acquisitions by state companies rose to 909 deals in 2016 – a record number. Commonplace during times of strong economic growth, one expert says the number of mergers and acquisitions is a strong indicator of a thriving Texas economy.
But even more impressive than the number of deals in the state is the average transaction price over the last three months of the year: over $1 billion. The drastic rise in deal values can be attributed to a confluence of business factors and one megadeal in particular, says Natalie Posgate of the Texas Lawbook. In October, Dallas-based AT&T agreed to purchase Time Warner, the parent company of HBO and CNN, for $85.4 billion.
Another prime factor in the rise in activity is the Texas energy industry. After years of volatility, energy prices – namely oil and gas – have experienced a period of stabilization.
“We saw prices stabilize a bit so buyers were willing to pay more for companies,” Posgate says. “Coupled with interest being low, companies were able to access money for cheap.”
Stable energy markets and the lucrative Permian basin located in Texas have given the energy industry a durable platform for deal-making in upstream exploration and production companies. But considering the AT&T media deal and other announcements such as Toyota moving to Plano, it is becoming clear that the state doesn’t rely solely on energy companies for its growth anymore.
“I think the landscape of the Texas business world is evolving,” Posgate says. “You see big companies like Toyota moving their headquarters here. I think we’re in for a big change in Texas.”
Written by George Economos.