A Comprehensive Study of Exxon-Mobil Mergers and Acquisitions

This dissertation provides a comprehensive analysis of the mergers and acquisitions undertaken by Exxon-Mobil, exploring the motivations behind these strategic moves. The study delves into the key features that contribute to successful mergers and acquisitions, examining the impact of these activities on the company and the broader market. It differentiates between mergers and acquisitions and organic growth strategies, evaluating their respective impacts on Exxon-Mobil's performance. The research employs a thematic approach, analyzing data over a decade, and utilizes secondary sources. The findings highlight the benefits of the Exxon-Mobil merger, including economies of scale and operational efficiency, which facilitated business expansion and improved resource utilization. The study also identifies the impact of these mergers and acquisitions on the marketplace, providing insights into the company's strategic rationale and future market development.

Running head: MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Mergers and Acquisitions: A Study of Exxon-Mobil
Name of the Student
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1MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Abstract
The study relates to identify the reason for mergers and acquisition of Exxon-Mobil. The study further
relates to know about the key features in successful mergers and acquisitions. In addition to this, the
various extent of the study has stated about the difference between mergers and acquisitions and organic
growth and its impact in Exxon-Mobil. Lastly, the study aims to identify the impact of mergers and
acquisition of Exxon-Mobil in the market place. The research analysis has been performed with
information available over 10 years and the study has used secondary sources to obtain the same. The
analysis has followed a thematic research approach. The overall finds have stated that t he expected
outcome and benefit from the merger of the two companies has led to economies of scale and would also
result in the operational efficiency. The Merger of the Exxon-Mobil company will help expansion of the
business operation into different regions so that the connectivity of business operations within the
company improves and operational efficiency would ensure optimum utilization of resources and wealth
creation for the company. Organic growth for Exon Mobil Company could be also done by expansion of
capital in the asset of the company and the same depends on the type and level of expansion desired by
the company. The key difference between both the factors is that the organic growth deals with the
internal investment and growth of the Company however, merger and acquisition deals with the
acquisition of the company as the same performed by the Exxon-Mobil Company.

2MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Table of Contents
Chapter 1: Introduction................................................................................................................................7
1.1 Background of the Study...................................................................................................................7
1.2 Rationale of the Research................................................................................................................10
1.3 Research Aim..................................................................................................................................11
1.4 Research Objectives........................................................................................................................11
1.5 Research Questions.........................................................................................................................11
Chapter 2: Literature Review.....................................................................................................................12
2.1 Mergers and Acquisitions................................................................................................................12
2.2 Motives of Mergers and Acquisition...............................................................................................13
2.3 Impact of Mergers and Acquisition:................................................................................................15
2.4 Features in Merger and Acquisition................................................................................................22
2.5 Organic vs. Inorganic Growth Approach.........................................................................................23
2.6 Motivation for Mergers and Acquisitions........................................................................................23
2.7 Approaches followed during the Merger and Acquisitions..............................................................24
2.8 Classification of Mergers................................................................................................................25
2.9 Forms of Integration........................................................................................................................26
2.10 Factors involved in Merger and Acquisitions................................................................................29
2.11 Shareholders Perspective Regarding Mergers and Acquisitions....................................................31
2.12 Regulations regarding the Merger and Acquisitions......................................................................31

3MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Chapter 3: Research Methodology.............................................................................................................33
3.1 Introduction:....................................................................................................................................33
3.2 Method outline:...............................................................................................................................33
3.3 Research onion:...............................................................................................................................33
3.4 Research philosophy:......................................................................................................................34
3.4.1 Reason for selecting the particular research philosophy (Positivism):.....................................35
3.5 Research approach:.........................................................................................................................36
3.5.1 Reason for choosing the particular research approach (Deductive):.........................................36
3.6 Research design:..............................................................................................................................37
3.6.1 Reason for selecting the particular research design (explanatory):...........................................38
3.7 Data collection process:...................................................................................................................38
3.8 Sampling and sample size:..............................................................................................................40
3.9 Data analysis plan:..........................................................................................................................40
3.10 Ethical considerations:..................................................................................................................40
3.11 Limitations of primary and secondary data:..................................................................................41
3.12 Timetable of the research:.............................................................................................................41
Valuation Overview..............................................................................................................................43
Chapter 4: Data Analysis and Findings/Results........................................................................................44
Motivations for Merger.........................................................................................................................44
Event Returns and Deal Terms..............................................................................................................45
Change Management.............................................................................................................................47

4MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Impact of Exxon Mobil Merger.............................................................................................................48
Strategic Rationale................................................................................................................................54
Vision for Future Market Development................................................................................................55
Key Features in Successful Mergers and Acquisitions..........................................................................57
Evaluation of key difference between merger and acquisition and organic growth and the impact of
Exxon-Mobil.........................................................................................................................................58
Identification of the impact of mergers and acquisition of Exxon- Mobil in the market place..............58
Chapter 5: Conclusion and Recommendation............................................................................................60
Reference...................................................................................................................................................64

5MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
List of Figures
Figure 1:Types of Mergers........................................................................................................................27
Figure 2: Research onion...........................................................................................................................33
Figure 3:Research philosophies.................................................................................................................34
Figure 4:Research approaches...................................................................................................................35
Figure 5: Research designs........................................................................................................................37
Figure 6:Pre-Merger and Post Merger Change in share price....................................................................46
Figure 7:Impact of merger & acquisition on the debt/capital.....................................................................49
Figure 8:ExxonMobil Stock Price (Black Line)........................................................................................50
Figure 9:Exxon Mobile and British Petroleum Equity Performance..........................................................52
Figure 10:Historical Equity Performance as per Price and Volume...........................................................53

6MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
List of Tables
Table 1:Forms of Acquisitions..................................................................................................................28
Table 2: Milestone Report.........................................................................................................................41
Table 3: Financial relations of Exxon/Mobil.............................................................................................46

7MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Chapter 1: Introduction
1.1 Background of the Study
In the beginning of 1980s the returns pertaining to the U.S. oil industry has stimulated significant
domestic exploration and developmental activities. In this aspect there had been noteworthy formulations
enacted pertaining to the free cash flows generation of the funds which are due to ill-advised
diversification. The main examples extracted from the oil industry in general need to be considered as per
“Cyprus Mines by Amoco, Anaconda Copper by Arco and Kennecott Copper”. Exxon decided to make
electric motor in acquisition with Reliance Electric to enter into the market of exploration of minerals.
The expertise pertaining to information systems needs to be developed as per the exploration activities
which are related to oil and natural gas.The purchasing of the Mobil of Marcor Inc has included the forest
produce, container trade and retailing operationsof Montgomery Ward (Tjemkes, Vos and Burgers2017).
The horizontal mergers across the oil industry needs to be identified as main form of the activity
prevalent in 1980s. The largest oil merger during the eighties surpassed more than $60 billion. This was
evident with Cities Service and Occidental Petroleum (Russell1980). The main form of the driving force
behind this is further identified in “Harvard Business School (HBS)”(People.hbs.edu2018). The case has
also presented the relevant details which are inferred as per Gulf Oil takeover. It had been observed that
on May 1982 Mesa Petroleum settled for a purchase deal of 5.1% in the “Cities Service Oil Company”at
a price estimated as $ 35.50 per share. This incident was followed by multiple bidder contest which
included companies such as Occidental Petroleum, Gulf and Mobil (Ruback1983).
In 2002, Intercor (ExxonMobil)sold its stake in the copper mines of Cerrejón coal mine in
different regions of Chile. In a similarperiod, the development of the extraction process of mining was
also evident with clearing of topsoil in various regions of the country. The recent initiatives taken by
ExxonMobil, in 2014, wasidentified with the approval of research and development of the project in Rio

8MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
Blanco County, Colorado. Despite of this, on November 2015, the company was able to relinquish its
development pertaining to federal trade commission (Magalhães2014).
The repetition in the oil price shocks has led to several type of changes in the oil industry with a
wide range of response to the adjustments. The considerable M&A activity took place between 1980 and
1985 and the divergence issues for the activities were considered to be unsuccessful in nature. The
significant restructuring efforts had been seen with a lower operating cost. The major horizontal mergers
have taken place from 1998-2001. “The Organization of Petroleum Exporting Countries (OPEC)” is seen
to be having a major influence in the oil prices. At the time when higher oil exploration was stimulated,
the wells had been shut down which resulted in the increase of non-OPEC production. In terms of the
periodic meeting OPEC has been able to sought a balance among the quotas for forecasting of the demand
and non-OPEC changes in the supply chain and aim of holding OPEC’s market share, which was
relatively stable at 40% (Hamilton and Webster2015). However, the recurrent cheating in the quotas of
production has led to carter behaviour. Moreover, recurrent cheating in the production quota is predicted
with an economic model and cartel behaviour. In addition to this, the economic development is also
related to OPEC countries and increase in the production (Lojanica 2015).
In 1994 and 2000, the merger activities were seen with highest intensity at a global scale which
had reflected a major change. These changes are depicted in terms of technological shifts, market
globalization and competition as a result of competition associated to deregulation in the major industries
and changes pertaining to the dynamics of the financial market. Moreover, the restructuring and merger
activities in the oil industry is seen with a broader force and personal characteristics. It needs to be also
discerned that the oil industry has a larger set of challenge pertaining to its size. In the recent times, the
major reserves are discovered outside U.S. The potentials for the future reserve additions are based in the
countries with significant political and business risk regulation (Lavrov and Aleksanyan 2017). The price
of the crude oil and other oil products are factually subject to wide range of variations. The relative
compensations for this are based on the operations incorporated with production, refining, market changes

9MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
and explorationactivities. The reduced information cost has also led to lowering of transaction cost. Some
of the most notable barriers to the entry process needs to be identified in terms of new specialist firms
which have catalysed the overall value chain. The ownership of the oil reserves is further seen with an
influential force in the military relationship and politics among the nations (Hamilton and Webster 2015).
The main takeover contests are depicted with merger and acquisitions taking place outside
industries other than petroleum. The liquor company Seagram initially bided for Conoco on June 1981.
This bidding was followed byMobil and DuPont as the company received 55% of the stock at the end of
bidding contest. Mobil also entered in the bidding when the Marathon Oil had reached
auncertainagreement with the U.S. Steel in 1981 which was included in the lockup option to buy the
prized asset. The programs for the cost reduction was developed with the changes in the
administrativestructure and systems which was sought with increasing the efficiency, responsiveness and
flexibility. In addition to this, the reductions in the employment and capacity has been discerned with
significant reductions. Due to such changes, there had been several natures of the variations were
associated to the cost structures from both fixed cost and variable cost. Moreover, these efforts are also
included in replacing the overall assets like leasing activities and tankers (Yijun and Li 2016).
The interpretations of the studies are also considered with fundamental variations in the structure
of the organization. In the initial terms, the organization structure has been depicted to be employed in
relatively higher degree of centralization and managerial authority. The important considerations of Mobil
were announced by receiving a tender of 55% of Conoco Stock. It needs to be also understood that Mobil
entered in the bidding process at the time when Marathon had reached its tentative contract with U.S.
Steel in 1981, this also included the lockup option for buying its prized asset of the Yates oil Field
(Hwang and Weems 2016).
The above examples are considered to be sufficient for stating that no oil company was immune
to take over the threat during early 1980s. The stock prices had reduced since this time. It was further

10MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
depicted as a cheaper option to buy the oil reserves on the Wall Street rather than E&D outlays. The
pressures pertaining to the major oil companies were able to relate to a wider range of rearrangement
activities. In addition to this, the various types of the programs for the cost reductions were also
conducive for overall reduction of the programs developed (Acheampong, Ashong and Svanikier 2016).
The changes in the organizational systems and services has been also able to contribute to increasing
efficiency, flexibility and responsiveness to the changes. The different types of the reductions pertaining
to the employment and capacity has also raised significant concerns on the impact of the merger and
acquisition. It needs to be further seen that there were several agreements made between 1980 and 1992
which led to increase in employment across eight major companies. This reduced from 800000 to 300000
by 62.5%. The headquarters staff had further reduced from 3000 to 800 in the six prominent oil
companies during 1988 to 1992 (Blăjuț 2016).
Due to such fluctuations in the oil prices, there had been no effort made in the organizational
structure. Initially the unitary or the functional organizational process was employed as per comparatively
high gradeof centralization pertaining to the managerial authority. In general, the administrative cost
could have been reduced to a great extent. However, the additional strategy benefits would originate from
the best business practices of the companies across the worldwide processes. In the news release of the
8/1/00, ExxonMobil had reported the synergies worth $ 4.6 billion (Ogj.com2018). The analyst report
projects are based on the use of the synergies worth $ 7 billion by 2002. The relevant nature of the
changes in the organizational structure has brought definite changes pertaining to the merger and
acquisition strategies which has considerably increased the efficiency, responsiveness and flexibility.
1.2 Rationale of the Research
M&A activities originated for more than four decades ago which has been more prominent in the
countries in North America and European Markets. The present study aims to identify the main reasons
behind mergers and acquisitions of Exxon-Mobil, identify key features in successful mergers and
acquisitions and evaluate difference between mergers and acquisitions along with organic growth and its

11MERGERS AND ACQUISITIONS: A STUDY OF EXXON-MOBIL
impact. The latter part of the study has considered the impact of mergers and acquisitions in the market
place.
1.3 Research Aim
The aim of the study is to examine the impact of merger and acquisition of Exxon-Mobil in the
market place.
1.4 Research Objectives
The main objectives of the research are enumerated as follows:
1. To identify the reason for mergers and acquisition of Exxon-Mobil
2. To know about the key features in successful M&A
3. To evaluate the difference between M&A and organic growth and its impact in Exxon-Mobil
4. To identify the impact of mergers and acquisition of Exxon-Mobil in the market place
1.5 Research Questions
The research questions of the study are listed as follows:
1. What is the rationale/reasons behind mergers and acquisitions of Exxon-Mobil?
2. What are the key features in a successful mergers and acquisitions?
3. What is the difference between mergers and acquisitions and organic growth and its impacton Exxon-
Mobil?
4. What is the impact of mergers and acquisitions in the market place of Exxon-Mobil?
Chapter 2: Literature Review
2.1 Mergers and Acquisitions
The process of M&A relates to the combination of the operations of two companies. The net
impact of the merger transaction shows that two individual ceases to exist at the time when a new