Although 2008 is shaping up to be a good year for oil and gas mergers, activity on the oil and gas M&A front will probably be down materially from 2007 levels. Many mergers have failed to realize their strategic objectives, and integration can be especially troublesome. Some common reasons for failure are: 1. failure to maintain focus on the customer, 2. Overestimation of synergies, 3. poor cultural fit and subsequent conflicts, 4. Inability to transfer skills, 5. Lack of vision, 6. Lack of cohesive leadership, 7. Inability to articulate direction, 8. Loss of momentum or focus, 9. Flight of talent/knowledge capital, 10. Organizational confusion and division, 11. Excessive premium paid, and 12. Inadequate emphasis on speed. Since 1990, half of major mergers have eroded shareholder returns, another 33% have resulted in marginal returns, and only 17% have contributed major value to the returns. On the acquisitions side, 77% do not earn or exceed their cost of capital, while 23% earn or exceed costs of capital. Two out of every three deals have not worked; the only winners are the shareholders of the acquired firm, who sell their company for more than its really worth.
MERGER AND ACQU
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