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Tariq Siddiqui's picture
COO Upstream EP Advisors LLC

Oil & Energy | Business Development | Capital Projects | Offshore Wind - Proven leader in offshore development and operations, with 25+ years’ expertise in managing business through cycles of...

  • Member since 2021
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  • Jul 21, 2021 9:31 pm GMT
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Technology M&A Are Challenging & Different, Especially During  Energy Transition. Companies making technology-based acquisitions, or those who require a technology-based asset valuation for other purposes, should be prepared with defensible, supportable valuation analyses that can stand up to scrutiny.

KEY INSIGHTS

What is Different?

  • More recently, there’s been an even greater focus not only on digital technologies, but also on low-carbon technologies. 
  • More companies in the energy industry have committed to reducing their carbon footprint as part of their overall ESG initiatives.
  • Examples of low-carbon technologies; bioenergy, carbon capture and negative emissions technologies, among many others.
  • In past intangible assets valuation in the energy industry, particularly within services companies, contractual and non-contractual customer relationships have typically been the primary intangible asset being acquired.
  • The newer trend is towards  transactions throughout the energy space in which either internally developed technology, in-process research and development (IPR&D), or know-how is the primary driver behind the transaction. 
  • As technology is the primary reason for acquisition; therefore appropriate attention to valuation of these assets is required
  • Valuation of technology-based intangible assets, more variables can be introduced  and care should be taken to provide adequate support for these various inputs (Ex: obsolesce factor, total R&D spend, time to commercialization, market based royalty rate etc.)

BOTTOMLINE

This means that investments in cost-saving and environmentally focused technology can be expected to continue. Just as customer-based asset valuations have recently received greater regulatory scrutiny and as technology has become more commonplace in the energy industry, companies and valuation providers could expect technology valuations to become more of an exam and enforcement focus in the coming years.

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