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Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry

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  • Ng, Alex
  • Donker, Han

Abstract

Can broad factors such as natural resources endowment and global commodity markets influence corporate takeovers? This paper theorizes that managers are motivated in mergers and acquisitions to purchase energy reserves and to time the commodity market in the oil and gas industry. We find supportive evidence that shows that energy reserves and prices cause and affect takeover activity, value, and performance. Acquirers are motivated to purchase reserves, while targets are motivated to sell based on market timing. Acquirers have negative takeover performance from lower risk. Our conclusions are robust to the traditional explanations: equity valuation, synergy, free cash flow, equity and debt market conditions, and economic cycles.

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  • Ng, Alex & Donker, Han, 2013. "Purchasing reserves and commodity market timing as takeover motives in the oil and gas industry," Energy Economics, Elsevier, vol. 37(C), pages 167-181.
    • Handle: RePEc:eee:eneeco:v:37:y:2013:i:c:p:167-181
    DOI: 10.1016/j.eneco.2013.01.010
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    8. Guo, Yue & Yang, Yu & Wang, Chang, 2021. "Global energy networks: Geographies of mergers and acquisitions of worldwide oil companies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 139(C).
    9. Reddy, Kotapati Srinivasa, 2015. "Why do Cross-border Merger/Acquisition Deals become Delayed, or Unsuccessful? – A Cross-Case Analysis in the Dynamic Industries," MPRA Paper 63940, University Library of Munich, Germany, revised 2015.
    10. Antonio García-Amate & Alicia Ramírez-Orellana & Mª José Muñoz-Torrecillas, 2018. "Economic Consequences Of Peak Oil For The Major Multinational Oil And Gas Companies," Eurasian Journal of Business and Management, Eurasian Publications, vol. 6(1), pages 23-41.
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    More about this item

    Keywords

    Takeovers; Mergers & acquisitions; Oil and gas industry; Oil reserves; Energy;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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