M&A (Merger and Acquisition) refers to the combination of two companies, either by blending together or one purchasing the other. Some of the most famous companies were once two separate ones.
ExxonMobil (NYSE: XOM), for instance, was once separately the Exxon Corporation and the Mobil Corporation. In 1998, the companies combined to become the oil giant it is today.
As oil prices drop, M&A in the oil patch will flourish. More, bigger deals are pending.
The biggest is the whopping $70 billion deal between Royal Dutch Shell and the fossil fuel company, BG Group. This means that Shell sees value in the other company’s assets, and a future in using them.
More recently, Noble Energy, Inc. followed suit by paying $2 billion in exchange for the takeover of Rosetta Resources, Inc., another fossil fuel company.
During these buyouts, natural gas company, William Companies Inc., was also getting in the game as they acquired William Partners for $13.8 billion. With all of these deals revolving around oil and energy, appraisals of companies, or price discovery, are becoming more trusted.
Such a mixture of trusting company values, low interest rates, and flat oil prices spells out an ideal environment for future oil M&A deals. Well healed ‘Buyer’ companies like XOM are seeking and finding good values.
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