NEW YORK (TheStreet) - The massive drop in oil prices have led many investors to speculate about the M&A that will take place in the sector.
However, it's remained relatively calm, as many management teams are waiting for additional clarity on oil prices before plunking down any large sums of money.
According to Maynard Holt, co-president of E&P investment banking at Tudor, Pickering, Holt & Company, the M&A activity may not get as heated as some investors are hoping for.
There's a discount between buyers and sellers, particularly for all-cash deals, he said at the IHS Energy CERAWeek conference in Houston. Those looking to buy want to do so because oil prices are unlikely to change anytime soon, he said.
On the other hand, those looking to sell want to do so on the notion that oil prices have fallen very significantly and will likely soon rebound, he said. Buyers want to do make a deal based on today's prices and sellers want to do so based on tomorrow's prices, Holt explained.
It was a good deal for both sides, according to Martin Houston, chairman of Tudor, Pickering and Holt International and former COO of BG Group. Shareholders at BG Group received a premium to their share prices, while Royal Dutch Shell was able to add new and valuable assets to its portfolio.
The deal will help Royal Dutch become a "really, really big global gas player," Houston added. It also gets a lot valuable, yet intangible assets, as the employees at BG are top notch.
It's rare for good management to have bad assets or for bad managers to have great assets, Houston said. Generally, great management teams have great assets and great employees, he said. So investors should keep that in mind when looking for which companies could be acquired next.
The day the deal is announced is not the time to judge whether it was a good acquisition. That time comes one to three years down the road, Houston concluded.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.