In 2020, Varel Energy Solutions was acquired by Blue Water Energy after Sandvik divested its operations relating to the oil and gas industry. The mining conglomerate bought Varel in 2014, but new ownership wanted to focus Sandvik’s business portfolio to core areas such as the mining-related part of drilling and completions.
So, a process was undertaken that connected Varel to Blue Water Energy, which consummated in Blue Water owning 60 percent, Sandvik maintaining 30 percent, and Nixon Energy Investment owning the other 10 percent. The overall enterprise value of the deal, according to Varel Energy Solutions President and CEO Derek Nixon, is about $130 million.
That infusion of capital in that deal has given Varel an opportunity to grow. He says the company is going to be looking at acquisitions, and hopes to announce another one before the end of the year. But while there are lots of companies for sale, it's not just any business they're looking to buy.
"When you look at the world out there there's a lot of businesses for sale right now, but it's finding ones that are complementary to what you're trying to achieve on your strategic vision. That for us is $55 million in EBITDA for 2025 — to put that flag in the horizon and march towards it. Finding businesses that are cash flow positive, positive EBITDA, but really then what are the synergies and how can we pull that through our enterprise to really drive that shareholder return?"
Alignment is such a critical component of a deal. Nixon says Blue Water Energy is very experienced in the oil field services all the way from downstream to upstream operators to service companies. They've really been able to be that strategic voice around M&A, giving guidance on deal terms, looking at multiples. They're also able to provide a war chest to find opportunities and grow this business.
"We can grow it organically all day but we're also going to have to do those acquisitions," Nixon says.
As he looks to grow through those acquisitions, Nixon 's time is split among strategic initiatives. He says in any given week that that shift or percentage of time changes pretty drastically.
"I'd say probably 30 or 40 percent you know spent around that M&A activity, understanding the pipeline. But at the same time, it's not just the M&A, but what does an exit look like for this business as well because that's what the shareholders are here for. The rest of it is on that long-term vision — here we are, here's where we need to get to, and filling in those gaps of what we need to be successful over that time period to be able to really achieve our long-term goals. The rest of it is really just staying in front of customers, staying in front of our people."
Varel, a Dealmakers Award Winner, spoke more at last year's Smart Business Texas Dealmakers Conference about the company's acquisition and how the deal sets it up to be the acquirer for years to come. Hit play on the video above to catch the full interview.