The markets are ripe for a robust round of M & A activity, said Bank of America Merrill Lynch investment banking managing director and co-head of Merrill Lynch Petrie Divestiture Advisors, Mark Deverka.

Speaking to attendees at a recent gas storage conference, Deverka observed that, although the energy industry saw a rapid transition from a rampant seller’s market to a relatively dormant buyer’s market in 2008, activity has increased because bid-and-ask spreads have tightened and the market tone has improved.

"U.S. corporate E & P transactions are picking up steam," he said. "The 2009 transaction count exceeded the total for 2006, 2007 and 2008 combined."

Meanwhile, joint ventures involving resource play development agreements between domestic firms and international buyers are continuing to garner significant attention, he said, adding, "As commodity prices stabilize, M & A activity will increase."

Deverka expects a re-opening of capital markets to buyers, and expects to see significantly improved terms, further driving deal flow. On the E & P side, new transactions will be announced as large, well-capitalized companies search for production and reserve growth.

On the domestic side, the North America M & A and asset environment is a buyer’s market, he said. Gas companies with technical advantages or exceptional operating efficiencies are the most willing to transact at the current strip price.

"There is an expectation of a rebirth in corporate M & A activity as opportunistic buyers seek to secure long-lived resource positions and small- to mid-cap companies face continued financing uncertainties and liquidity pressures."

In addition to M & A activity, several equity capital raises were completed in 2009 and 2010. Recent raises were driven by three distinct strategies, he said.

Repayment of debt was the most common trade as revolvers were reduced in the spring and fall. Most of those raises involved moderate pricing and moderate aftermarket stock performance.

Some distressed equity was issued in "save the company" trades, characterized by the worst pricing and the best aftermarket performance. Many issuers were forced to "leave money on the table" in these issuances, according to Deverka.

And some equity was sold to fund future capital expenditures and drilling programs. These transactions were seen to have the best pricing and strong aftermarket performance.

"Companies able to take advantage of equity markets to fund capex in the current market are being rewarded," he said.

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