Merger and acquisitions

: the case of ExxonMobil and Anadarko

Abstract

The rationale under Merger and Acquisitions (M&A) has a huge spectrum, but it is always assumed to be a way of increasing shareholders value. The recent downturn in the oil and gas (O&G) market has been creating some speculations where M&A arises as a way to join companies that together can be more efficient in handling periods of low prices. In fact, this is a great opportunity for those with solid financial positions to invest in undervalued companies, and thus, strengthen their competitiveness in the future. This dissertation focuses in assessing the potential value added from a deal between ExxonMobil and Anadarko. The former with an integrated business model and a strong balance sheet, and the latter, solely dependent on the upstream segment which means being more exposed to fluctuations in oil prices. Thereafter, an in-depth company and industry analysis is conducted in order to establish which assumptions to apply to the valuation methods. The individual and combined analysis is supported by a literature review on valuation and M&A. Based on a theoretical framework, the merged entity valuation is developed, followed by a proposed price, method of payment and acquisition strategy. Anadarko’s standalone valuation suggests that its average share price during 2015 is undervalued with 13% upside potential. Due to synergies of $33,96Bn, the proposed deal has a premium of 49% and the final suggestion being an all-cash offer.

Date of Award	21 Oct 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	António Borges de Assunção (Supervisor)