Private equity investment for energy sector is picking up steam again - Findlay Anderson

But beneath the noise, there is a section of the industry that has been quietly (until now) getting on with driving its own change and rewriting its next chapter. The UK oil and gas industry has for decades acted as an accelerator for a world-leading service sector with thousands of companies driving new technologies and carrying the flag for UK industry around the world. New-start companies have grown into reputable family businesses, which have become household names and in some cases PLCs. And behind many of these technology and service vehicles are the private equity houses and venture capitalists investing in technologies, driving acquisitions and enabling growth.

Thanks to the Covid-hangover and market pressures, deal-making in the past few years has been subdued. Initial three- or four-year investment plans in many cases shifted to seven- or eight-year involvement with investee companies. That has meant a short-term reduction in capital available to redistribute in the markets. But it has also meant that private equity houses have been actively reassessing their portfolios, resetting the exit clocks and recalibrating the growth strategy. And we are now seeing increasing evidence of deal activity as those strategies move into the execution phase.

Private capital investors are taking a range of steps to refresh, diversify and grow their portfolios, aligned to the energy transition. Oil and gas supply chain businesses are aggressively diversifying their target markets, leaning into renewables, nuclear and downstream grid-level opportunities.

And faced with the need to pursue that next chapter of growth, many companies are expanding internationally, acquiring technologies and increasingly tendering for projects in overseas markets. This is all unlocking new deal activity and it feels like there is renewed energy in this part of the sector.

Speed, strategy and commitment are key themes here, and private equity houses are usually founded on these values. For the legal profession, the same rings true. Advisors need to act quickly in an ever-changing market, providing valuable counsel to help clients evolve and grow. But they also need to be willing to walk with them through both challenge and opportunity. A prime example of that was the recent landmark win for US-based private equity house, Lime Rock Partners, where Gilson Gray’s litigation experts successfully defended one of the single biggest damages claims in Scottish legal history. And on the operational front we are increasingly seeing portfolio businesses looking for help to diversify internationally whilst managing risk through growth.

Our team’s experience in the energy sector and the corporate finance space means we are well-placed to support firms looking to do business both in the UK and overseas.

For those of us directly involved in the sector, we hear all too frequently about the long list of macroeconomic, environmental, and political challenges facing the UK’s energy ecosystem. However, for those companies, investors and advisers willing to turn it into a positive and adapt to the changing environment, it is also a time of opportunity.

Findlay Anderson is head of corporate, Gilson Gray