Exxon Mobil Merger Essay

1290 Words Aug 11th, 2012 6 Pages
Mergers and Acquisition: Exxon Mobil Merger

Introduction
Industry mergers or business combinations are a phenomenon that has been commonplace for quite some time now. They basically involve two or more organizations coming together to form a large corporate under which they operate. The new organization which may have a combination of the names of the merging components or a totally new name operates as a new entity. The new rule under which the new entity operates depends in the agreement on the terms of the merger. As stated in our advanced accounting text, the history of mergers can be traced back to the 1895 to 1905 period in the US when the
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They turn all the energies that went into competition before to promote their joint product together. In my view, this kind of combination is easier than others since the two merging groups already understand their market and understand each other’s product perfectly.
In December 1, 1988, the Exxon and Mobil oil companies announced their intent to carry out a horizontal combination valued at approximately $80 billion. (CNN Money, 1998). The aim of this combination was to “Create an oil entity rivaling the biggest in the world”. The two chief executives Exxon’s Lee Raymond and Mobil’s Lucio Noto announced then that the main motive of their merger was to compete more effectively in the face of sharp drops in oil prices. One objective the bigger company was set to achieve would be to cut costs of operation so as to maximize profit. Industry analysts also said that it was a good prospect for the two firms to merge since many organizations at the time were slashing the pay of employees and making capital spending plans to cut costs. Under the terms of the agreement the new company would be called the Exxon Mobil Corp, retaining both the Exxon and Mobil brands, and the company will be headquartered in Exxon's home city of Irving, Texas. During acquisition, Exxon had a market value, premerger, of $175 billion, compared with $58.7 billion for Mobil. Exxon had a P/E ratio of about 23.6 versus 17.9 for Mobil. Exxon paid 1.32 shares for each share of…

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