Merger and acquisitions(M&A) have become an important part of the growth strategies of many organisations. The oil and gas industry is a dynamic space. As you may know, M&A activity can rise and fall with time.
Mergers And Acquisitions- At A Quick Glance
Mergers and acquisitions are a primary tool in a company’s value creation toolbox. The main purpose of M&A activity is to enhance the value or accelerate the growth of a business. Both M&A allow a company to grow at a rate that would not have been possible because of organic growth.
There are many leading training organisations that offer the best training courses in the oil and gas industry. Before you join a course, let’s discover the steps in the Merger and Acquisition process in the oil and gas industry.
Step 1. Strategy Development
An M&A strategy sets a clear expectations for those who are involved in the project. Since each deal is unique, therefore the strategy should address what your organisations wish to achieve and how it will get there. For instance, if it is related to increasing the share in the current market or expanding product lines, or customer base, the strategy must be defined based on the decided goals.
Step 2. Set Certain Criteria
When firms have decided on their M&A strategy and aim, the next step is to create a profile of their ideal merger or acquisition. organizations must assess crucial factors such as what the company should supply. They should think about the company’s size, financial status, and products or services offered. They can also consider the consumer base, culture, and any other aspects relevant to the buyer’s position. These factors will aid in the elimination of subpar prospects.
Step 3. Identify And Contact Targets
They can appoint a search team, which identifies, classifies, and evaluates suitable candidates who can meet the organization’s strategic growth and financial goals. They can begin contacting and reaching out to them. This will initiate two-way communication with possible targets, which will aid in learning more about the company, understanding their interest, and assessing the overall amenability between the two entities.
Step 4. Acquisition Strategy
The acquirer draughts the initial contract for one or more companies that fit the acquirer’s search criteria and looks to be a fair bargain. In most cases, the buyer would generate a letter of intent (LOI) to express interest in pursuing a merger or acquisition and also give a synopsis of the potential transaction.
Step 5. Performing Valuation Analysis
This is without a doubt one of the most important steps in any M&A process. The target company offers more detailed information about its business to the buyer, typically in the form of a confidential comprehensive memorandum (CMI) or a deal book. This includes detailed information about the company’s history, which will aid in the appraisal process. Aside from that, corporations consider cultural fit, external variables that may affect the deal’s performance, such as timing, and other forms of synergy.
Step 6. Negotiation
After producing several valuation models of the target company, the acquirer should have the necessary information to enable it to make a reasonable offer.
Step 7. Conduct Due Diligence
Once the offer is decided, the acquirer must conduct due diligence which is a comprehensive process that helps to examine, evaluate and analyze all aspects of the whole operations and financial positions.
Step 8. Executing Transactions
After the due diligence, two parties can proceed to negotiate the logistics of the transitions such as the regulatory, operational and cultural issues, etc.
Step 9. Integration Process
The last step is integration princess which involves planning of finances, organizational structure, roles, and responsibilities. This process should be mentioned for several months after the deal is done.
Mergers and acquisitions are considered key parts of any business strategy. If you want to learn these steps in practical ways, consider joining the highly-engaging oil and gas training courses offered by Promise Training & Consultancy.
We offer both offline and online oil and gas courses as well as oil and gas refinery training courses in the UAE.