34 WW W.OGFJ. COM | OIL & GAS FINANCIAL JOURNAL JANUARY 2016
EUGENE M. KHARTUKOV, MOSCOW STATE UNIVERSITY, MOSCOW
A PRIMER FOR ENERGY EXECUTIVES ON OIL AND GAS MERGERS AND ACQUISITIONS
M&A in the global petroleum industry
MERGERS AND ACQUISITIONS in the petroleum industry
refers to the aspect of corporate strategy, corporate finance,
and management dealing with the buying, selling, dividing, and
combining of different petroleum companies and similar entities
that can aid, finance, or help an enterprise grow rapidly in its
sector or location of origin or a new field or new location without
creating a subsidiary, other entity, or using a joint venture. The
distinction between a “merger” and an “acquisition” has become
increasingly blurred in various respects (particularly in terms
of the ultimate economic outcome), although it has not completely disappeared in all situations.
THE MAIN IDEA
One plus one makes three: this equation is the special alchemy
of a merger or an acquisition. The key principle behind buying
a company is to create shareholder value over and above that
of the sum of the two companies. Two companies together are
more valuable than two separate companies – at least, that’s
the reasoning behind M&A.
This rationale is particularly alluring to companies when
times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company.
The companies will come together hoping to gain a greater
market share or to achieve greater efficiency. Because of these
potential benefits, target companies will often agree to be
purchased when they know they cannot survive alone.
Takeover is a corporate action whereby a company (bidder)
acquires a publicly traded company (target) by purchasing its
outstanding shares. Takeovers may be classified into friendly
EDITOR’S NOTE: This is the first in a series of articles by Professor Khartukov about the increasing importance and relevance
of mergers and acquisitions in the global petroleum industry.
Part 2 will run in the February issue of OGFJ.