The Exxon-Mobil Merger: An Archetype

Abstract

In response to change pressures, the oil industry has engaged in multiple adjustment processes. The nine major oil mergers from 1998 to 2001 sought to improve efficiency so that, at oil prices as low as $11 to $12 per barrel, investments could earn their cost of capital. The Exxon-Mobil combination is analyzed to provide a general methodology for merger evaluation. The analysis includes: the industry characteristics, the reasons for the merger, the nature of the deal terms, discounted cash flow (DCF) spreadsheet valuation models, DCF formula valuation models, valuation sensitivity analysis, the value consequences of the merger, antitrust and competitive reaction patterns, and the implications of the clinical study for merger theory.

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