Inspired by CNOOC‘s recent $15.1 billion bid on Nexen Inc., a growing number of foreign firms (particularly those in Asia) are becoming interested in doing energy deals in North America. 

Without going into the technical details, here are some of the tips that the foreign firms should consider when structuring deals with U.S. energy firms:

• Due Diligence.  A foreign firm should pay attention to due diligence, when it attempts to identify and evaluate opportunities.  In North America’s vast energy markets, there are literally thousands of targets, ranging from the small coal reserve companies with asset value of multi-million dollars, to the large oil and gas companies with EBITA of hundreds of millions or even billions of dollars.  Deals may take the form of an acquisition, joint venture, partnership, distribution or import/export arrangement.  When performing due diligence, a foreign firm should look at not only the target company’s finances, management, and business model, but also larger factors such as the available infrastructure (e.g., transportation),political climate, and regulations that affect the target company.  Once a target company is identified, the foreign firm, through its engaged representatives (usually, a law firm or investment banking firm with significant experience in similar deals), can approach the target, investigate its business and help a foreign firm decide if the target presents a good business opportunity with acceptable risk.

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