MERGER, ACQUISITON AND INTERNATIONAL STRATEGIES 7
Merger,Acquisition and International Strategies
Mergersand acquisitions (M&As) are companies formed as a result of acorporate decision of two companies that come together and form amore powerful company (Hennessy, 1966). In some cases, a companytakes over another one by buying all its assets and rights. In such acase, it is a full acquisition. In other instances, two companiescome together to form a large company, with the two parent companiesinvolved fully in all activities of the newly formed powerfulorganization (merger). Some experts say that the companies marry, andthe two made one. In the USA, most of the local and internationalcompanies that are well established have gone through the mergingprocess more than twice. For instance, the Microsoft, a computingcompany, has become extremely strong and powerful out of merging andacquisition of smaller companies such as Adallom. In fact, Microsofthas merged over 250 companies, and it acquires more than sixcompanies annually. Similarly, some companies feel they can performbest if not interfered with by other companies regarding merging. M&Ahave many advantages and drawbacks. This essay uses two energycompanies in the USA (ExxonMobil and Murphy Exploration &Production Company) to show how mergers by companies or decisions notto merge can be advantageous or faulty.
Keywords:mergers, ExxonMobil, oil companies, Murphy`s oil corporation
ExxonMobilis an oil company found in the USA with its headquarters in Irving,Texas. It is one of the leading international companies that grownbecause of, among other factors, merging with other oil companies.During the merging process, the chairperson of Mobil, Noto, said thatthe two companies would come together because of opportunity but notout of desperation (Choka, 1969). He said the two companies wouldeasily survive independent of each other, but they would not havemaximized the available expansion opportunities they had throughmerging. Some of the major factors that led to the merging of thesetwo companies include reducing unhealthy competition, falling pricesof oils, enhancing technological competitive advantage and enhancinglong-term capital productivity.
Thelow prices of oil in the year 1998 and 1999 when Exxon and Mobil weremerging had led to a very low-performance level of oil companies allover the world. Some of the companies had to strain extensively intrying to maintain a balance between the production costs and thesatisfaction of the customers through maintaining stable pricesdespite the changes in price. Some of the unfortunate companies hadeven gone to an extent of slashing the payrolls of their employees,but such acts could not have a net positive effect. Through themerging, ExxonMobil was able to share and raise the costs of findingnew oil reserves and hence curbing most of these alarming challenges.
Technologically,the two companies, before merging were fully equipped each with theirown unique and advanced methods in technology (McCord, Neill, &Pearlman, 1975). The act of merging led to an even more powerfulforum for modern techniques in the production and distributionprocess.
Themerging process was not set to benefit shareholders and companyowners alone. The customers also benefitted a lot in various ways.First, the quality of the produce was increased. Having broughttogether two major companies each with their method of ensuring thereis perfect output, the net output because of combined skills wasamazing. In addition, the two companies upon merging were in aposition to enjoy even larger economies of scale. For instance, themerged company could access market areas in all regions of the world,an advantage that would not have been effectively possible for one ofthe companies alone.
Throughcombined efforts of the two merged companies, the ExxonMobil hasbecome the third largest companies in the word. It has also appearedconsecutively in the top five of the Fortune 200 companies. In 2014,the ExxonMobil was position three in the Fortune 500.
Inas far as, the benefits of merging Exxon with Mobil are too many toexhaust, there is a hoard of challenges encountered in the mergingprocess. First is the fear of ‘monopoly`, the fear of negativeperception and outcome as well as initiating power of the risk. Thechallenges, however, suppressed by the benefits caused, and we canconclude that the decision to merge the two companies was the wisestthey ever made.
MurphyOil Corporation is an international oil producing company based inthe USA, Malaysia and Canada. Unlike the ExxonMobil oil company,Murphy does not believe in forming alliances with other companies asa breakthrough way to get access to wider opportunities and chancesin achieving its goals. The corporation spreads worldwide and has herheadquarters in El Dorado, Arkansas. The stock of the company inthe Stock Exchange market (SEM) bears the title MUR (ticker symbol).
MurphyCorporation incorporated in the 1950s, more than six decades ago.Most companies that started with Murphy at the same time span havemade great progress concerning increasing profitability and expandingtheir production levels (McCord, Neill, & Pearlman, 1975). Thesecompanies have made it because they have put into consideration thepower of economies of scale. The growth rate of this business isextremely low. For instance, it took eight whole years for thecompany to purchase a refinery in Wisconsin. For an average oilproducing company, this should have been a very simple taskaccomplished in the first three or two years of establishment.Similarly, the company has been trying to reach out to the entireworld but has covered only a very minute fraction of it. Most of itsactivities set base in North America, as it is not possible forMurphy to enjoy the economies of large scale.
Recommendationsfor improvement of Murphy
Internationalcorporate level strategies
Thecompany should make various internal strategies through which theycan expand their levels of production. Such are organizing formergers and improving worker conditions.
Hundredsof oil and energy companies in North America aspire existing asindependent companies despite their weaknesses. Murphy should lookfor a suitable company and merge with it e.g. the ConocoPhillips. Thecoming together of these two companies will lead to increasedopportunities for the merged companies and a general increment inproduction.
Themerging of two companies combines the capital base of the two mothercompanies and creates a higher power of great investment.
Improving human resource
Therole of human resource in production should never be undermined. Thelabour force plays a key role in the enhancement of maximumproductivity. For this reason, human resources in the organizationand critical management are essential. Most well developed companieshave provided extra-salary services to their workers that enhanceadhesion to the organization and increased cohesion among them. Forinstance, subsidizing goods for the workers of the company andorganizing pension and promotion schemes for them. Such servicescreate an implication in the mind of a worker that they are part ofthe organization, and they will always work for its good.
Whythe ConocoPhillips is the best company to merge with Murphy
TheConocoPhillips though does not appear much in the Fortune 500, is arapidly growing gas company. It was started in 1875 (Hennessy, 1966)and since then, its growth has been continually progressive. Thecompany has developed adequate infrastructure and at its level, it isat the accelerating stage of growth. In addition, the company hasmore outlets in the less competitive parts of the world such as SouthAmerica and Australia. The merging of Murphy with this company willensure that there is a steady flow of goods in markets throughout thewhole world, and there is a day-to-day expansion of the market. Thehigh level of infrastructure in ConocoPhillips will boost the growthand development of Murphy`s infrastructure upon merging since theywill apply the same growth policies previously used.
Theseare generic strategies aimed at helping organizations to acquirecompetitive advantages over other rivals in other countries. Thecompany should lay these strategies together with the corporate levelstrategies. Through processes such as extensive product promotionthrough social media, effectiveness is achievable. The businessesshould also create forums where they get to know what customers fromall over the world require and so increase the popularity of thebusiness through customer satisfaction.
Hennessy,J. H. (1966). Acquiringand merging businesses.Englewood Cliffs, N.J: Prentice-Hall.
McCord,J. H., O`Neill, A. C., & Pearlman, R. A. (1975). Coursematerials on buying, selling, and merging businesses: Study outline.Philadelphia: American Law Institute, American Bar Association,Committee on Continuing Professional Education.
Choka,A. D. (1969). Buying,selling, and merging businesses.Philadelphia: Joint Committee on Continuing Legal Education of theAmerican Law Institute and the American Bar Association.