FREE ESSAY ON EXXON MOBIL MERGER TREND ANALYSIS

EXXON MOBIL MERGER TREND ANALYSIS

Exxon Mobil Merger Trend Analysis
With the Exxon-Mobil deal official, other big oil companies are now in a mating game. The
companies are mulling their own mergers to keep pace with this new
mega-rival, and to survive the near-collapse of world oil prices that spawned the
marriages of Exxon and Mobil--and British Petroleum and Amoco Corp. --in the first
place.
Exxon and Mobil's $75.3-billion merger gave the combined company a dominant presence in
U.S. and world oil markets that is sure to draw antitrust scrutiny. Exxon Mobil is
America's largest oil company and antitrust issues are being raised because of its
refining capacity and share of the U.S. gasoline market. 
This does not mean a merger wave will automatically roll through the industry; mergers
routinely collapse over issues of price, management egos and other factors. But every oil
company is at least going over its options now that Exxon and Mobil, the two biggest
players in the U.S. oil industry, are joining to create an awesome competitor.
To be sure, other possible pairings in the oil patch are just speculation for now, and
the companies themselves aren't commenting. But attention is shifting to the likes of
Texaco, headquartered in White Plains, N.Y., and San Francisco-based Chevron Corp.--the
nation's third- and fourth-largest oil companies, respectively--as potential buyers. They
are likely to consider buying smaller rivals because most of their peers are now spoken
for, namely Exxon, Mobil and Amoco. Yet it is also possible that some of those smaller
rivals might pair up to bolster their positions.
Either way, the consolidation is having a major impact on the three oil companies
headquartered in Southern California: Atlantic Richfield Co. (Arco) and Occidental
Petroleum Corp., both based in Los Angeles, and El Segundo-based Unocal Corp.
Arco, a leading force in Southern California gasoline sales but a relatively small player
worldwide, has been rumored to be a takeover target for months.
The merger turmoil means it is nail-biting time for tens of thousands of oil company
employees in California and worldwide. A key purpose of these mergers is to slash
overlapping operating costs so that the companies can keep growing profits, even with oil
at historic low prices. That means huge layoffs.
Big Oil is just now going through a massive consolidation that's already taken place in
many other industries, including aerospace, banking, pharmaceuticals, retailing and
financial services.
The trigger, of course, is the plunge in oil and gasoline prices to levels not seen in
decades. That drop has dug deeply into the companies' profitability, making it harder for
them to compete for new exploration and production projects around the globe.
But antitrust scrutiny of oil mergers--in light of oil's incalculable importance to the
world economy--will be considerable, one reason why it is hard to speculate on which oil
companies might eventually join forces. Another problem is whether the two companies 
can efficiently mesh upstream operations, which involve exploring for and producing oil,
with downstream operations, or the refining and selling of oil products. 
Regardless, companies are likely to seek viable partners first and worry about the
details later, because the Exxon-Mobil deal could so accelerate Big Oil's merger trend
that potential partners might not be available for long.
Bibliography
Peltz, James F.; Exxon-Mobil Deal Has Other Firms Assessing Options; Business Week,
October 1999