Phrases like ‘global pandemic’ and ‘negative oil price’ don’t tend to embolden investors. They would normally send them running for cover with their chequebooks safely tucked away for sunnier days.
Yet while these aren’t normal circumstances, it remains true that business isn’t always a fair weather game.
There are always going to be rainy days (they’re the ones you’re meant to save for). Safe to say what we’ve seen recently isn’t just a rainy day. In biblical terms, Noah would be brushing up on his boat-making skills round about now.
But thinking counter cyclically can be a game changer for many businesses. After the flood comes opportunity, as the waters recede and the green shoots of growth begin to sprout.
The risks across all sectors have been focused sharply through the lens of coronavirus, but there are businesses that will be looking for chances to merge with rivals or to acquire struggling peers.
As was the case in previous downturns, this could see foreign companies swooping into the North Sea to purchase distressed oil and gas assets or UK-based firms broadening their portfolios with some international expansion of their own.
The reinvigoration of activity in either direction will be a welcome fillip given the current constricted trading conditions the market is facing. But when M&A activity returns – and return it will – the transaction process needs to be as smooth as possible.
Companies need to have confidence to see and seize opportunities swiftly and act decisively. Removing obstacles to the deal making process is critical, especially at times of volatile oil prices when opportunities can be fleeting.
One potential hurdle to concluding business speedily is delays with foreign exchange. Firms that mitigate this risk by having experienced and well equipped FX partners will put themselves in pole position to do business quickly and effectively.
Currency specialist Global Reach Group offers services that enable energy companies to remove uncertainty so they can act swiftly and with confidence. The company’s position as an FX only operator makes it far more fleet of foot than traditional banks, and the exchange rates it offers are significantly better than those available at its high street rivals.
Energy companies must also be alert to the effects that volatile currency markets can play in the current trading environment, and look to hedge foreign exchange exposure to mitigate risk in this area. There has been significant volatility in currency markets recently, with the GBP/USD rate dropping to a 35-year low. For some, this has presented a significant opportunity and for others a severe risk.
Most oil companies hedge their commodity prices but don’t do the same with FX. This simple adjustment to a business strategy in the current climate can generate significant cost savings.
Already actively engaged with partners in Aberdeen such as AAB and Addleshaw Goddard, Global Reach’s expertise helps clients to conserve cash on all M&A transactions and also achieve consistent savings across their CapEx and OpEx requirements.
This expertise will be a key weapon in the arsenal for companies that engage in deal making when the flood waters of the current crises recede and new opportunities emerge.
If you are concerned about the impact recent volatility is having on your business or how to save money in your M&A activity, Global Reach will help. Contact Daniel Harden on DHarden@globalreachgroup.com or +44 (0)20 3465 8202 for a free, no obligation review of your current FX exposure.