Detailed Analysis: Exxon Mobil Merger and Acquisition - Finance Report

This report provides a detailed analysis of the Exxon Mobil merger and acquisition. It begins by defining mergers and acquisitions and then delves into the specific case of the Exxon Mobil merger in 1998, highlighting that the merger was driven by factors such as market share expansion, increased profitability, and addressing oil price fluctuations. The report examines the financial details of the merger, including the US$73.7 billion agreement and the strategic goals of creating a stronger company to compete in the energy market. The report also explores the context of the merger within the changing dynamics of the energy market, including technological changes, globalization, and the scarcity of oil resources. The report concludes by summarizing the key reasons for the merger, including tackling price fluctuations, becoming a leader in the energy sector, and the historical connection between Exxon and Mobil. The report references various sources to support its analysis.

Running head: MERGER AND ACQUISITION
MERGER AND ACQUISITION
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Table of Contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................2
Question 3..................................................................................................................................3
Reference....................................................................................................................................4

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Question 1
Merger refers to the joining of two companies which may be due to various reasons
such as obtaining more market shares, widening the scope of operations of the company or to
increase profitability of the company (Risberg and Annette). In the case of Exxon Mobil
merger which took place in 1998 for US$73.7 billion. The company became the third largest
company in the world and the largest oil company. This was then recognised as the third
largest merger of that corporate time. The merger was done for reasons so that the company
can tackle the fluctuations in oil prices and diversification into other unrelated areas was
unsuccessful. A lot of mergers took place at that time in order to counter the fluctuations of
prices (Weber, Yaakov, and Shlomo Yedidia Tarba). Another reason for the merger was that
the two top companies can join hands and become the leader of oil Industry and eliminate
whatever competitions that was there. Exxon Mobil merger took place after the merger of
British Petroleum and Amoco. The merger actually resulted in Exxon acquiring the business
of Mobil and the shareholders of Mobil were given for 30% in the new company and the
shareholders of the Exxon were to get around.
Question 2
The merger transaction took place in 1998 Exxon and Mobil companies signed a US$
73.7 billion agreement. Exxon Company was engaged in energy business and was the largest
energy company at that time whereas Mobil was into gas and oil exploration business and the
company was second largest at that time. The merger took place in order to tackle the
fluctuation of oil prices and the demand for energy in various sectors (Gomes et al.). Another
reason for the merger was to establish a new stronger company which can face their
competitors together. The company also wanted to ensure that the merged company together

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can make a stronger company which will then acquire major portion of market shares of
energy market.
There were a large number of mergers which took place in the energy market during
1994 and 2000 which showed that the market of energy is changing. The changes were
fluctuations in prices, technological changes, globalization of markets (Shi et al.). These were
changing the dynamics of the market rapidly. The oil industry was widely depended on for
energy at that time and the resources were exploited to no ends. As the oil is scarce resource,
it experienced wide range of fluctuations. These fluctuations resulted in shutting down of
many oil industries. In order to adjust to such price fluctuations many oil business merged to
survive and withstands such changes. Many other oil firms decided to diversify their product
line to unrelated products in order to survive the market fluctuations (Nguyen et al.). Thus the
management of Exxon decided to acquire and merge with Mobil which was the second
largest gas and oil company to form Exxon Mobil ltd.
Question 3
Exxon was merged with Mobil in 1998 for the reason to tackle the price fluctuations
which was prominent at that time. The price fluctuations at that time had driven most of the
business to either merge or diversify their business in order to ensure the survival of the
business. Another reason for the merger was to ensure that the company can be become the
giants in energy sector as both the company was leading firms in the energy sector. Another
reason is that both the companies were directly related to Standard Oil Company. Exxon was
formerly known as Standard Oil Company of New Jersey and Mobil was formerly known as
Standard Oil Company of New York. Both the companies together merged became a giant in
Oil and energy business (Holburn et al.). Exxon Mobil ltd has acquired maximum shares in
the market and is one of the leading companies in energy business. The merger was a

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successful strategy as the company became the leading energy producer in the world and the
company in general produces around 3% of the world’s total energy.

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Reference
Gomes, Emanuel, et al. "Critical success factors through the mergers and acquisitions
process: revealing pre‐and post‐M&A connections for improved performance." Thunderbird
international business review 55.1 (2013): 13-35.
Holburn, Guy LF, and Richard G. Vanden Bergh. "Integrated market and nonmarket
strategies: Political campaign contributions around merger and acquisition events in the
energy sector." Strategic Management Journal 35.3 (2014): 450-460.
Nguyen, Hien Thu, Kenneth Yung, and Qian Sun. "Motives for Mergers and Acquisitions:
Ex‐Post Market Evidence from the US." Journal of Business Finance & Accounting 39.9‐10
(2012): 1357-1375.
Risberg, Annette, ed. Mergers & acquisitions: A critical reader. Routledge, 2013.
Shi, Weilei, Jing Sun, and John E. Prescott. "A temporal perspective of merger and
acquisition and strategic alliance initiatives: Review and future direction." Journal of
Management 38.1 (2012): 164-209.
Weber, Yaakov, and Shlomo Yedidia Tarba. "Mergers and acquisitions process: The use of
corporate culture analysis." Cross Cultural Management: An International Journal 19.3
(2012): 288-303.