Title: Trends in Midstream M&A
Speakers: Bill Swanstrom and Jenelle M. Simmons
Bill Swanstrom (00:08):
Well, Jennie, how are you doing today?
Jenelle Simmons (00:10):
Bill, it’s a great day. Every day I get to talk to you is a good day.
Bill Swanstrom (00:13):
That is so profound and also true, particularly given what we get to talk about today, which is trends in midstream M&A. You and I both do a ton of midstream M&A, so hopefully we have some notes to share that are helpful to both each other and anyone else who might be listening.
Jenelle Simmons (00:32):
Everything we say is always brilliant, so.
Bill Swanstrom (00:33):
Well, just to kick things off — last year there were quite a few midstream M&A deals, 35 according to investment banker surveys. We at Troutman worked on 15 of those, so yay us. Unfortunately there were some deals that happened that we weren’t involved in, which is hard to believe, but people learn their lessons and hopefully they come around next time.
So 35 last year, and in the first quarter of this year, there were eight midstream M&A deals — more or less consistent with the prior year. Now, most of those deals were in the first part of the first quarter, kind of following up on the 2024 wave. You had Kinder Morgan buying Outrigger, you had our good client Summit Midstream buying Moonrise, and a couple of Epic Pipeline deals. But then toward the end of the first quarter and into the second quarter, midstream M&A basically stopped happening. In the second quarter of 2025, maybe there was one or two deals, and even those are debatable — Colonial Pipeline getting sold to Brookfield, which is a big deal but not really midstream, and a couple of others.
As the quarter ended and the third quarter began, we are starting to see a pickup in deal activity. So the question is — why? What do you think accounts for both the slowness and now the uptick?
Jenelle Simmons (02:11):
That’s a great question, Bill, and you and I talk about this all the time. I think a lot of the choppiness we saw in the first half of this year was due to uncertainty — uncertainty about what the administration was going to do, what position they were going to take on certain policies, tensions around tariffs and trade, and some up and down in the financial markets. I think all that volatility led to the choppiness we saw in the M&A market with respect to midstream.
During that period, though, even when things were a little slower, we were still seeing clients kicking tires on a lot of deals. So even though deals weren’t necessarily getting closed and announced, we were still seeing a lot of activity.
I think what we’re seeing now with the increase in activity is that people are ready to get deals done. We have a lot of private equity-backed midstream companies where the private equity backers are looking to monetize. One deal you didn’t mention was the ENG Medallion sale, which we closed at the beginning of this year. Those private equity funds are ready to go ahead and move some of these assets.
We’ve also got some upstream companies looking to monetize their midstream assets. You mentioned the Summit Moonrise deal — Summit acquired the midstream assets from Fondaire earlier this year. And on the buy side, we’ve seen strategics with a lot of cash on the balance sheet looking to deploy that capital and grow strategically to gain scale. So you’re seeing a lot of people who want to get deals done, and given that we’re already in the second half of the year, it’s time.
Bill Swanstrom (04:05):
I agree with all that. Some of the other things we’re seeing: all the bigger infrastructure funds have raised new pools of capital and are looking for ways to deploy that money. Brookfield just raised a significant amount, and Blackstone, I Squared, and BlackRock are all actively looking at potential acquisitions in midstream.
There are also some new entrants into the market. Sixth Street is looking at midstream deals. Kane Anderson used to be a big player in midstream, dropped out of it — at least in the private equity world — but they just did a deal a couple of months ago backing Ironwood and an acquisition, with big plans to roll up additional midstream assets. So increased interest on the buy side and ongoing interest on the sell side generally means more deal activity.
Another phenomenon we’ve observed — it hasn’t happened yet — but there are new funds whose business mission is to help private equity funds acquire assets that are having a hard time finding a home with strategics and the bigger infrastructure funds. That’s been an interesting development as well.
Jenelle Simmons (05:32):
I agree with all that. And what do you think is driving all of the increase in demand? Do you think data centers have anything to do with it — the increased demand for energy?
Bill Swanstrom (05:40):
For sure. The data center buzz is more than just buzz — it’s real. We’re seeing midstream activity specifically driven by optimism about the need for gas to power gas-fired power plants and provide energy to data centers. And then increased LNG exports are another tailwind behind at least the natural gas part of the midstream sector.
Crude prices are still challenging, and that’s probably going to continue to be a problem given concerns about the economy and worldwide macro issues that can cut both ways in terms of crude demand. But it hasn’t been a great pricing environment for crude. Natural gas, on the other hand, is very strong.
Jenelle Simmons (06:31):
So, do you think we’re going to continue to see an increase in deal activity and deals actually getting done through the second half of the year?
Bill Swanstrom (06:38):
I think so. We’ve heard about a couple of deals getting done recently that haven’t been publicly announced but are pretty well validated. You mentioned deals where E&P companies are selling midstream assets — I think we’re getting close to having an announcement on a deal that fits that description, maybe a couple of deals.
Jenelle Simmons (07:03):
And relating to that, what’s interesting is that a lot of those deals involve a commercial aspect as well.
Bill Swanstrom (07:07):
Yeah, let’s talk about that. When you’re buying midstream assets from an upstream company, that does involve a significant amount of extra work documenting the commercial relationship between the upstream company and the midstream company. You were firsthand involved in some of that — do you want to talk about it?
Jenelle Simmons (07:28):
Sure. For example, we’ve talked about the Moonrise Summit deal a couple of times. That involved a heavy commercial component. We’re very fortunate that here in Houston we have a great energy commercial team, and they were heavily involved in negotiating and drafting the gathering agreements and related agreements with Fondaire. So from the M&A side, it’s nice to also have the commercial aspect covered.
Bill Swanstrom (07:54):
Yeah, for sure. It’s one of the things that makes us different from other law firms — having both a great midstream M&A team and a midstream commercial team. That’s been particularly helpful on some of these recent deals.
Maybe another question people have — or that I have — are we seeing stock being used much in some of these M&A deals?
Jenelle Simmons (08:13):
We do see stock used. That being said, I think you and I would both agree cash is still king. In a competitive bid process, a bidder who proposes an all-cash purchase price is going to be more attractive to a seller than someone proposing some sort of equity consideration. But at the end of the day, we’re seeing whatever it takes to get a deal done.
Bill Swanstrom (08:33):
Yeah, and not all deals get done. There are still a number of companies trying to get sold, running a process — there’s interest, but not enough interest at the right price to get deals across the finish line.
Jenelle Simmons (08:50):
And related to that, I think we’re seeing deals that are just taking longer to get done than they might have last year. We talked earlier this week to the CFO of one of our midstream companies, and he was even saying how slowly things are moving. People are just being cautious given all the uncertainty we talked about earlier — making sure the price is right and making sure they’re not missing something.
Bill Swanstrom (09:17):
For sure. It’s caution — and there aren’t quite as many buyers on the buy side, so buyers don’t feel pressured to move quickly when they know there’s limited competition on some of these situations. So it’s still a challenging market, but getting better. I do think we’ll see an increase in activity in the third quarter and fourth quarter. It’s hard to go down from zero, so hopefully you go up from zero. We know for sure about deals that are happening or about to happen, so fingers crossed.
Jenelle Simmons (09:53):
Agreed — we’re ready.
Bill Swanstrom (10:01):
Well, thanks, Jennie. This has been great. I always enjoy our visits and talking about what’s going on in midstream M&A.
Jenelle Simmons (10:01):
I love it. My favorite part of the day.
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