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Merger and Acquisition Strategy in Energy Sector

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Added on  2020-01-23

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How strategy of merger is used in energy sector during oil price drop 4 Example of companies adopting the strategy of Merger and Acquisition4 Challenges in faced in merger and acquisition6 Benefits of merger and acquisition strategy for energy sector 8 CONCLUSION 9 References 10 Introduction Merger takes place when two companies decide to combine into a single entity because of any reason. Further, in this report, the way in which selling merger and acquisition strategy can be used in the energy sector after falling the price of oil and gas industry

Merger and Acquisition Strategy in Energy Sector

   Added on 2020-01-23

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Merger and Acquisition Strategy in Energy Sector_1
TABLE OF CONTENTSIntroduction......................................................................................................................................41. How strategy of merger is used in energy sector during oil price drop...................................4Example of companies adopting the strategy of Merger and Acquisition...................................4Challenges in faced in merger and acquisition............................................................................6Benefits of merger and acquisition strategy for energy sector ...................................................8CONCLUSION...............................................................................................................................9References......................................................................................................................................10.......................................................................................................................................................102
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INTRODUCTIONMerger takes place when two companies decide to combine into a single entity becauseof any reason. Present report is based on the energy sector which is facing many difficulties dueto reduced price of oil. Energy sector achieve a balance between short term viability and alsomaintaing their long term objective.. Energy firms consider different strategies that will help itto stabilize or improve their position through technology or resources. Further, in this report, theway in which merger and acquisition strategy can be used in the energy sector after falling theprice of oil and gas industry will be explained. Benefits of the merger and acquisition as strategyof energy sector. And also the challenges faced by the energy sector during the time of Mergerand acquisition1. How strategy of merger is used in energy sector during oil price dropWhen two companies combine together into a single entity, it is known as merger.Merger and acquisition are the growth strategies for company. Major goal of a firm in acquisitionmay be to enter in a new market during the time of fall in price (David, and David, 2016.).However, merger and acquisition strategy are mainly applicable in energy sector for making theactivities of firm flow in a smooth manner. To remain successful, oil and gas industry must fill their reserves of oil they get profit byselling their product. There are many infinite resources on which companies are dependent.Business invest from larger company and sells their reserves and unproductive assets. Manycompany of energy sector investor increased their position, by recognizing the opportunity.For example, Capobianco who likes to take advantage of companies by selling non-coreassets due to excess of available oil. When oil price dropped the time (Hill, Jones, and Schilling,M. A., 2014), many problems were faced by the U.S. economy as for the firms dealing in thissector, it has become very hard to survive. Example of companies adopting the strategy of Merger and AcquisitionThere is considerable decrease in merger and acquisition activity from the last year in oiland gas market. It is expected to change this year irrespective of changes in price. If price of oilremains low, small players will come into the financial struggle and sell their assets ((Bettis,Gambardella, and Mitchell, 2014). On the other hand, if price of oil will get increase other3
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company try to achieve their position in competition market. It will result in the movement ofdeals that are set to determine the energy industry.In 2015 the monthly deal count an coverage fell by over third. The value of dealsexcluding the Shells billion mega takeover a deal of BG group- by two thirds.New report of Wood Mackenzie is specialized in consulting firm domain, the merger andacquisition also hit the development in the industry. Seen last year the low level of merger andactivity is not according to the report (Ward, and Peppard, 2016). Low price is placingconsiderable pressure on small oil and gas companies. Many of firms are currently operating indifferent circumstance. If the price of oil remains low, many organizations will be forced to selltheir assets and merge with business so that their capital free up to survive the low oil priceconditions. Results is many potential target, will be relatively cheap. The top tier of international oilcompanies required to take action to ride out a further year of low price. Because of this, actionslike selling assets will required to be taken by the firms (Ward, and Peppard, 2016). It has beensaid by Luke Parker who is the researcher director at Wood Mackenzie that it does not matterwhether the price of oil will increase or decrease or if it will be nowhere in 2016, pressure will beon both; buyers as well as the sellers. Merger and Acquisition market when will be recover willbe depend on how price move in 2016.If price of oil increases, many companies will engage in inorganic growth activity. WoodMackenzie is forecasting a significant incline in merger and acquisition during 2016 (Hitt,Ireland, and Hoskisson, 2012). In the year 2015, Companies are focused on survival, they needto secure their deal before competition grow. In the market, companies are earmarked by analystsas acquisition target include Anadarko, Apache, ENI, occidental, petroleum, as well firms suchas Apache, OMV, Tullow, etc. Structural demand is now lower due to increase in sustainableenergyOther example, Worlds leading providers of services to the offshore oil industry aremerging and selected the UK as combined company domicile (Hill, and Jones, 2013). FMCtechnology of the US and Technip of France are agree to merge to equal and create the worldsecond largest listed oil services group by revenue, and a market capitalization of about $ 13bn.4
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