Exxon mobil merger analysis. ExxonMobil Merger 2022-12-17
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Exxon Mobil is a multinational oil and gas corporation that was formed through the merger of Exxon and Mobil in 1999. The merger was a controversial one, with many questioning whether it would result in a more efficient and profitable company, or if it would lead to a loss of competition and higher prices for consumers. In this essay, we will analyze the Exxon Mobil merger to better understand its impact on the industry and the broader economy.
One of the main arguments in favor of the Exxon Mobil merger was that it would lead to cost savings through economies of scale. By combining the two companies, Exxon Mobil would be able to eliminate duplicative functions and streamline operations, resulting in lower costs and higher profits. This was expected to benefit shareholders, as the company's profitability would increase, and it could potentially pass on some of these cost savings to consumers in the form of lower prices.
However, there were also concerns that the Exxon Mobil merger would lead to a loss of competition in the oil and gas industry. With the two largest companies in the industry merging, there was the potential for reduced competition and higher prices for consumers. This was especially concerning because the oil and gas industry is a vital part of the global economy, and any increase in prices could have significant impacts on the cost of living for people around the world.
Despite these concerns, the Exxon Mobil merger was approved by the U.S. Department of Justice and other regulatory agencies. In the years following the merger, Exxon Mobil has remained a dominant player in the oil and gas industry, with a strong presence in both exploration and production as well as downstream operations such as refining and marketing. The company has also continued to be profitable, with strong financial performance in the years following the merger.
Overall, the Exxon Mobil merger has had a mixed impact on the industry and the broader economy. While it has resulted in cost savings and improved profitability for the company, there have also been concerns about a loss of competition and potential negative impacts on consumers. However, the continued strength of Exxon Mobil in the years following the merger suggests that the company has been able to effectively integrate the two businesses and take advantage of the benefits of the merger.
Exxon Mobil Merger
Both companies are merged with the intention to create the world largest oil and gas service provider. The trigger, of course, is the plunge in oil and gasoline prices to levels not seen in decades. ExxonMobil Energies was created in the year 1999 with an ambition to enable America to play a key role in the manufacturing of natural gas and oil exploration. If a post-merger H index is between 1,000 and 1,800 and the index was increased by 100 or more, the merger would be investigated. A Comparative Analysis Of Nike And Under Armour 3388 Words 14 Pages This compare and contrast paper will explore the history and development of these two corporate giants; conduct a strategic and financial analysis of each company; and compare and contrast the executive leadership, corporate strategy, acquisitions and divestments of each. NOI Cash tax rate Income taxes NOPAT + Depreciation Change in working capital Capital expenditures Change in other assets net Free cash flows Cost of Equity Unlevered Discount factor Present values Panel B Operating Relationships As a % of Revenues 12. Pacific expanded dramatically after the discovery of oil in Saudi Arabia.
Florida: The Dryden Press. The reduced costs of information have lowered transaction costs. The exercise simply illustrates that the spreadsheet valuations and the formula valuations produce similar results. Restructuring efforts sought to lower operating costs. Before we begin further with the SWOT analysis of ExxonMobil, let us discuss the company, what products it has to offer, its financials and its competitors. Traditionally, the petroleum industry has been characterized by a varied pattern of relationships among the megafirms, other large integrated firms, specialized firms, oil service firms, and the NOCs. This establishes the planning relationships between value drivers, performance results, and the resulting projected intrinsic value levels of the firm.
For the 9 major oil industry mergers during 1998 - 23 2001, Table 13 summarizes value changes industry adjusted over a window from 10 days before the announcement date to 10 days after the announcement date. Opportunities The demand for energy in developing countries continues to rise as governments and private investors open additional industries. At higher prices, exploration for oil was stimulated. Application of the DCF Percentage of Sales Method to ExxonMobil Projections were developed for the combined company for the years 2001 and beyond as shown in Table 6. Arco, a leading force in Southern California gasoline sales but a relatively small player worldwide, has been rumored to be a takeover target for months. The critical mass size requirements for research and development efforts in all segments of the oil industry have been increasing, so the combination would be risk-reducing in that dimension as well.
The first used the WACC, but keyed on an incremental return on investments and on an investment rate normalized by net operating profit after taxes. By comparing each of the eleven key metrics with the median value, we have made a generalized conclusion about the quality of the financial condition of the company. Weaknesses The growth of any business lies in its ability to develop novel products and services depending on changes in consumer needs. With the merging of these companies, Bayer now controls over a quarter of all seeds and pesticides in the world. Steel, for example, was created in 1901 when eleven companies came together to form the first billion-dollar holding company. That means huge layoffs.
The same may be assessed and suitable measures may be suggested by the external change agent. Both the premium analysis by J. In response, factories altered production processes away from the use of oil. Comparable Valuations Comparisons may be made with comparable firms or with comparable transactions. That deal is still pending. This is developed in Table 8.
Oil Price Instability The interactions of cartel policies and market forces have produced oil price instabilities. This megamerger of oil industry reunited the major disintegrated divisions of the Standard Oil which had once controlled approximately 90% of oil production in the United States. ExxonMobil should consider investing in African states like Kenya, Ghana, and South Africa where the demand for oil and gas is high. They are likely to consider buying smaller rivals because most of their peers are now spoken for, namely Exxon, Mobil and Amoco. Industry Characteristics The oil industry, like other industries, has been forced to adjust to the massive change forces of technology, globalization, industry transformations, and entrepreneurial innovations. Kaplan and Ruback KR 1995 used CAPV to predict the actual transaction values for a sample of 51 highly leveraged transactions.
These efforts included replacing owned assets, such as tankers, with leasing Cibin and Grant, 1996. Morgan and the ratio ranges of Goldman Sachs result in a relatively wide spread of values. Armentano, The Myths Of Antitrust Arlington House, 1972 , p. There are two major components of ExxonMobil 's capital productivity scheme, merger synergies and continuous base efficiencies. . With a projected 38% 15 tax rate and a capital structure with 70% equity, the base case WACC is 9.
Of the top 25 oil firms, 15 are at least partially state-owned. This was a 26. This strategy has utilized the benefits of group work hence has helpedthe company effect it strategies to dealing with organizational changes. The future direction of the companies over the next three to five Deepwater Horizon Oil Case Study 991 Words 4 Pages Since BP was the main operator of the Macondo project, BP will be the starting point for my research. Hyper-Competition: Managing the Dynamics of Strategic Maneuvering.
These plans thereforefacilitated the company to successfully implement its organizational strategic changes. ExxonMobil is headquartered in Texas, the US. This establishes the planning relationships between value drivers, performance results, and the resulting projected intrinsic value levels of the firm. Tests of Merger Theory Three major types of merger motivations were identified by Berkovitch and Narayanan 1993 : synergy, hubris, and agency problems. This decline resulted in a massive write-down of the AOL Time stock. New York: Free Press. The Exxon-Mobil combination is analyzed to provide a general methodology for merger evaluation.