For the majority of global oil and gas companies, 2016 was a tough year. Buffeted by depressed crude oil and natural gas prices, corporate profits were squeezed, sparking widespread restructurings, layoffs and in certain cases bankruptcies.

In normal circumstances, such conditions would be a boon for merger and acquisition (M&A) activity. But uncertainty over the length and severity of the commodity price downturn created a value mismatch between buyers and sellers. The result was a moribund M&A market in the oil and gas sector. In fact, according to business advisory firm Deloitte, the first half of 2016 saw the lowest number of deals and deal value in 5 years.

On reflection, it’s easy to see why deal activity in the oil and gas sector slowed. Firstly, there was a notable lack of terminally distressed sellers; hedging strategies have mostly worked and companies have been able to renegotiate debt and lower operating costs. On top of this, there have been fewer funding options available, in terms of both equity and debt, for buyers of oil and gas assets.

For 2017, it is very much a buyers’ market in the oil and gas industry, but with some caveats. Purchasers are being asked to come up with more innovative ways of structuring deals and are increasingly required to negotiate with a wider group of stakeholders. Further complicating the M&A picture is the emergence of private equity and other financial buyers who, unaccustomed to normal industry practice, bring a vastly different approach to risk and costs.

For sellers, there is plenty to consider before beginning the asset disposal process.

Firstly, is a sale the right option? The current state of the market requires close inspection. Are conditions conducive to a sale? And is there sufficient appetite for such a transaction? Sellers also need to consider the short and long term prospects for the business as this will have a bearing on whether the disposal path should in fact be pursued.

Engaging a transaction team early in the sales process can help identify and deal with such problems and keep a disposal project on schedule. Beyond legal assistance, sellers need to consider picking a financial/transaction adviser to advise on sale options and identify suitable buyers.

Another significant factor to consider is whether a company is “fit” for sale. Could the business be restructured, or any legacy issues corrected, prior to a potential sale to make it more appealing to suitors? Such concerns should be pre-empted and addressed early to make the entire process a smoother, less stressful experience.

Establishing what are the clear “deal breakers” for any transaction is also strongly advised before engaging in a transaction. Having a deep understanding of the business, as well as the accompanying issues and risks associated with it will help immensely during any negotiating process. It pays to focus on the key concerns surrounding the asset, and be robust holding your ground when your agreed “deal breakers” are tested.

With more quality oil and gas assets set to come onto the market in 2017, the outlook for M&A is brightening, especially compared to last year. And when one considers that the industry’s underlying fundamentals are improving, and corporate credit profiles on the mend, then the prospect of more transactions becomes a reality, not just a mirage.