Phillips 66 (PSX) and QEP Resources Inc (QEP): Are There More Midstream Buyouts to Come?

But what about economies of scale? Surely it makes sense to see just as many mergers as spinoffs. What Armstrong says next is also important to keep in mind:

But I will tell you structurally, MLP consolidation is challenging to do, and you have to really be committed to it, and you’ve got to know that the seller is committed to it, because if you have a two-tiered GP structure on both sides of it, that’s a whole lot of legal fees and investment banking fees to get that deal done.

Obviously, we have seen many mergers in the industry over the past few years. They aren’t impossible, and aside from Kinder Morgan, Enterprise Products Partners L.P. (NYSE:EPD) and Energy Transfer Partners LP (NYSE:ETP) have both been very active over the past 10 years. But these are established outfits; I would approach a brand-new MLP’s attempt to acquire another brand-new MLP with more caution, should such a deal arise.

For now, though, it seems the market conditions are much more conducive to simply launching new MLPs, rather than buying existing ones.

The article Are There More Midstream Buyouts to Come? originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy owns shares of Plains All American Pipeline. Click here to see her holdings and a short bio. If you have the energy, check out what she’s keeping an eye on by following her on Twitter, where she goes by @TMFDuffy. The Motley Fool recommends Enterprise Products Partners.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.