Bracewell’s Adam Blythe discussed with Law.com International how delays to major oil and gas deals across Africa are causing challenges in navigating complex regulatory environments and government involvement in transactions.
“Everything is more complex than it was five to ten years ago and deals now take a lot longer to do,” said Blythe.
Traditionally, mergers and acquisitions in the sector are given a completion period of six to 12 months, but for lawyers advising their clients, that deadline now seems ambitious considering recent developments.
Blythe, who led a team that recently closed a deal for Eni S.p.A. in connection with the sale of its wholly owned subsidiary, Nigerian Agip Oil Company Limited, said although the delay varies from country to country, it is largely due to the government interface that has created some regulatory complexity.
“So quite often there might be a national oil company that is involved in the target asset. And so sometimes those entities have rights to approve or preempt and take over the deal and in recent times.”
“We have seen an increased appetite for those national oil companies to actually preempt and become involved in deals,” he noted, citing when the Gabonese government overruled a $1.3 billion divestment deal between two energy companies.
Another challenge is getting the needed government approval before proceeding with deals, which Blythe said has proven to be a ‘sticking point’ as the approvals are “taking longer and are less certain to obtain.”
Blythe further mentioned that the sources of the funding for the deals have shifted from the traditional financing institutions to emerging lenders who are sometimes commodity traders like Glencore and Mercuria.
According to him, some of the London and Paris-based banks, which were formerly the biggest lenders, have retreated from the sector due to ESG concerns and shareholder pressure, and those that are filling the gap are slowly emerging.
“And that sort of financing has been incredibly useful,” Blythe said. “But when you have multi-source financing, they, just by necessity, are more complicated with more parties involved. You have to have intercreditor arrangements between them. So, that is an additional complication, which means it takes more time to resolve those things.”
For law firms advising on these deals, this might mean more work for specialists in the sector. With more parties involved, more lawyers are involved in different regulatory aspects, Blythe said. On the other hand, he added that means there are more things to discuss, debate, negotiate and finalize.
