Mergers and Acquisitions in the Oil and Gas Industry

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Table of Contents

Introduction
Objectives
Analysis
Conclusions
References

Introduction

Mergers and acquisitions are common strategies that companies often use to expand their operations to new markets. The oil and gas industry has witnessed numerous mergers and acquisitions as they struggle to expand their operations beyond their national borders. As Whitaker (2016) explains, this strategy offers a company a unique opportunity to expand rapidly within a given market using an already established business system.

The ability of a merger to achieve success depends on numerous factors. Some mergers are often successful, while others end in failure because of the approach taken. In this study, the researcher will compare some of the successful mergers in the past several years. The merger of Standard Oil of Ohio and British Petroleum in 1978 and the acquisition of Sonnen GmbH byRoyal Dutch Shell in 2015 will form the focus of this study.

Objectives

The objective of this study is to investigate the changing trends and compare0 mergers and acquisitions in the oil and gas industry over the past decades. According to Dringoli (2016), strategies and beliefs that guided mergers and acquisitions in the 1980s may be different from those in modern society. It is necessary to understand these changes so that companies can understand the approach they need to use when they opt for mergers and acquisitions as the appropriate strategy for expansion.

The study will review the amount of information available to the public regarding these major mergers. The research will also focus on the regulator’s point of view concerning these mergers. It is necessary to understand why they would approve some mergers and acquisitions but reject others. The study will also review the rate of mergers in the industry, the value that this strategy has, and its prevalence in public and private sectors.

Analysis

Mergers and acquisitions have been in existence for the past several decades as a strategy for market growth. The approach not only creates instant new markets for a firm but also eliminates competition. Instead of the two firms competing, they can work as a unit, combine their resources, and focus on achieving a common goal in the market. The merger between the Standard Oil of Ohio and British Petroleum enabled BP to become one of the largest oil and gas companies in the world (Jacobs, 2016). It has enabled the company to expand its operations to the global market.

The recent acquisition of Sonnen GmbH by Royal Dutch Shell has also made it possible for the shell to cement its position in the market as a dominant player (Shepherd, 2015). A comparative analysis of the two mergers shows that in both cases, the goal was to help the acquiring firm to enter specific markets. It is evident that in both cases, the regulators did not view the mergers as a threat to having a competitive market. International Competition Network approved the acquisition of Sonnen GmbH by Royal Dutch Shell. Although there is plenty of information available to the public in the merger between the Standard Oil of Ohio and British Petroleum, that between Sonnen GmbH and Royal Dutch Shell was done in secrecy. In both cases, there was a value addition to the resulting companies after the mergers. Both firms are public limited companies.

Conclusions

When a firm is operating in a highly competitive business environment, it is important to choose the most appropriate strategy that can guarantee its growth. The oil and gas sector is one of the most volatile and highly competitive industries in the global market. The ability of a firm to be successful depends on how effectively it can protect its current market share while at the same time exploring new markets.

Mergers and acquisitions have become a popular strategy that companies in this industry are using to gain new markets. However, studies have shown that not all mergers and acquisitions are successful. The compatibility of the two firms is one of the main issues that define the ability of a firm to be successful. The two firms must have a common vision and compatible business structures.

References

Dringoli, A. (2016). Merger and acquisition strategies: How to create value. Cheltenham, United Kingdom: Edward Elgar Publishers.

Jacobs, D. (2016). Blowout: The inside story of the BP deep-water horizon oil spill. Washington, DC: Brookings Institution Press.

Shepherd, M. (2015). Oil strike North Sea: A first-hand history of North Sea oil. Edinburgh, United Kingdom: Luath Press Limited.

Whitaker, S. C. (2016). Cross-border mergers and acquisitions. New York, NY: John Wiley & Sons.

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Mergers and Acquisitions in the Oil and Gas Industry

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