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MARKET LEADER
BP
In this programme you will see an interview with Rob Peabody. He is a Senior Manager in BP who has overseen many mergers and acquisitions, including the BPAmoco merger, the largest ever to take place in the energy sector. He will talk about the major issues surrounding corporate mergers.
BPs origins go back to 1908, when a wealthy Englishman, William Knox DArcy found oil in the Iranian desert. The nationalisation of Irans assets in 1951 convinced BP that it had to broaden its activities and in the following years the company started explorations in other Middle East countries, such as Kuwait, Libya and Iraq. However, its most important discoveries were in the North Sea and Alaska in the 1960s, which transformed the company and enabled it to survive the impact of the two oil price shocks of 1973 and 1979, even though the new oil fields didnt start production until the mid 1970s. Amoco Oil Corporation was founded in the US in 1889 by John Rockefeller. It was first incorporated as Standard Oil of Indiana, formed from the break-up of gasoline giant Standard Oil. Since then, it has grown into a global oil and gasoline conglomerate. The merger of BP and Amoco created one of the strongest energy and petrochemical companies in the world, with interests in more than 70 countries.
B What other companies do you know that have merged? Was the merger successful?
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Pearson Education Limited 2006
Photocopiable
MARKET LEADER
Video vocabulary
A In the course of this interview, Rob Peabody frequently uses the word synergy, often
in combination with other words. In this context, a synergy can be defined as the extra power, success, profits, etc. achieved by two or more companies, working together instead of on their own. Read the sentences below and then underline the word in italics which fits best. 1 During the merger, the two companies achieved cost / time synergies, reducing their overheads by at least 50 per cent. 2 It is pointless embarking on a merger unless you can identify a substantial synergy initiative / prize. 3 Tangible / Intangible synergies include things like reduced costs, increased marketing opportunities and enhanced market position. B The words and expressions in bold are from the video. Match them with their definitions (ae). 1 Merging with another company is one way of enhancing your market position, particularly in an industry where bigger is perceived as better. 2 When it comes to negotiation, top-tier companies are taken more seriously by governments. 3 You have to make a specific initiative to keep your customers informed at every stage of a merger. 4 Any company that pays a control premium can be said to have acquired the other company. 5 In industries which obtain the basic ingredients for their products from outside suppliers, mergers can bring procurement prizes. 6 By merging with a company in a similar industry, they achieved a substantial marketing prize and sales of their main product rose dramatically. a) a particular and planned effort b) a benefit derived from access to a new market c) improving your rank in the hierarchy of companies operating within your market d) the best or most successful e) an extra sum of money which grants a position of superiority f ) benefits from reduced costs in the acquisition of raw materials
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MARKET LEADER
Video on
Now watch the whole of the interview. Does Rob Peabody believe, on the whole, that mergers and acquisitions are a good thing for a company?
B What does Rob Peabody mean when he says the following things? Choose the correct
answers. 1 The fourth one is all around egos. a) Companies merge because they are in complete turmoil. b) Companies merge because they are afraid of the powerful companies around them. c) Companies merge because they want to display and increase their power and status. 2 Its quite a grey line. a) Its deeply depressing. b) Its difficult to assess. c) Its rather boring.
B Are these statements true or false, according to what Rob Peabody says?
1 2 3 4 5 6 Mergers dont usually cost a lot of money. One of the most important things to consider when contemplating a merger is the cost. It is very difficult to reduce your costs unless you can also reduce your workforce. There may be opportunities for products from both companies to be sold in new markets. Keeping people informed of what is going on is the key to winning them over. People always react badly to bad news so you need to be prepared for this.
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Photocopiable
MARKET LEADER
Talking points
1 2 Who has the most to gain and who has the most to lose from a merger? How should the management of a company deal with difficult issues like reducing the size of its workforce?
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