There are many theoretical explanations of why mergers and acquisitions come about, different types of mergers which exist and the benefits and negatives of doing so. The one which I believe underpins all mergers and acquisitions it that of Hubris. Hubris is the notion that management get too sure of themselves through times of good results. The effect of this is that managers think that they can identify why other companies are not doing so well and believe that acquisition will improve the situation.
It is my personal belief that mergers and acquisitions only work when the intention is to increase greater economies of scales. This is particularly applicable to companies within the oil industry who need to merge to gain access to limited exploration and production sites. However even this is not always plain sailing.
The merger of BP and Tyumen Oil Company is a great example of how coming together can have significant benefits in terms of improving the balance sheet and revenues. Profit Margins have increased year on year and only today they have announced another takeover of the Koltsovo airport company.
But despite all of these successes the greatest press releases TNK-BP have received have been about the internal disputes the new partners have undergone over their time together. Collapsed deals and disagreements on strategy finally came to boiling point last year. Russian partners accused BP of foul play resulting in an embarrassing and aggressive statement being made from TNK-BP when bailiffs turned up to the UK offices. Although they have now settled and made public displays of unity - for the most part this has been a very expensive fall out for BP. Subsequently BP had to sign over assets to TNK-BP as a means of out of court settlement and took the costs of a failed deal with Rosneft.
I would imagine this kind of outcome was not anticipated at the start of the deal. BPs ex chief exec Lord Browne was once quoted as saying "There is a big cultural problem with mergers or equals ... in the end their has to be a controlling strain from the two companies'. Although I cant say that this was 'the' case for the TNK 50/50 deal, it seems obvious that when BP went into partnership with 5 lesser experienced Russian billionaires, this would have been the consensus. Unfortunately for BP the partners weren't willing to stand so silently and be used in the pawn game of oil exploration. The question for BP was - was it worth it? Did the profit outweigh the cost? According to the 2010 end of year report no - but account disclosure is another issue with in itself.......
What this example does teach us is that unless one part of a merger group is willing to step aside and let the other be in charge then it can never work, or can do so only at a cost and hold the potential to damage professional reputation.
http://www.ft.com/cms/s/0/1fa32f2c-03c9-11e1-bbc5-00144feabdc0.html#axzz1oXNTx46G
http://english.pravda.ru/news/russia/18-08-2003/51950-0/
http://blogs.ft.com/beyond-brics/2011/08/31/bp-another-mauling-in-moscow/#axzz1oXZajoQ1
http://www.ft.com/cms/s/0/0fe8475e-67b8-11e1-b4a1-00144feabdc0.html#axzz1oXNTx46G
http://www.infoworld.com/d/the-industry-standard/the-7-worst-tech-mergers-and-acquisitions-168942
http://www.bloomberg.com/quote/TNBP:RU
http://www.4-traders.com/TNK-BP-HOLDING-OAO-6498768/news/TNK-BP-HOLDING-OAO-TNK-BP-Acquires-Fuelling-Company-at-Koltsovo-International-Airport-in-Ekaterinbur-14209101/
http://www.ft.com/cms/s/0/164ea02a-241f-11e1-bbe6-00144feabdc0.html#axzz1oqD6qOAD
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