The Performance Evaluation Of Chinese Oil Enterprises Overseas Mergers And Acquisitions

The paper,based on the merger of Nexen by CNOOC,states the background,motivations and process of this merger.Furthermore,it analyzes the performance of this merger by five types of indicators.Besides,the author stipulates the avoiding strategies and strategic effects of M&A.According to the analysis,the paper draws the conclusions and summarizes the enlightenment.Major findings of the paper are:(1)The merger of Nexen by CNOOC has strategic significance but with many twists.The merger experienced three postponements regarding the approval process and it was impacted by the charge with insider trading.The merger has experienced ups and downs in a whole.After the merger is completed,the CNOOC's overseas net production of oil and gas reserves has doubled the amount in 2012.Moreover,the time length of resources exploitation has extended to 40 years.(2)The short-term operating performance of this merger is not as good as expected.Within one year after the completion of the merger,the major financial indicators show a declining trend.Specifically,the return on total assets has dropped 5 percent and return on equity has declined 4 percent in 2013.What is worse,the CNOOC' share price has dropped 18.15 percent.Moreover,the net income of Sinopec and Petro China respectively increased 12.36 percent and 5.8 percent,but the net income of CNOOC has sharply dropped 11.35 percent.(3)This merger provides some enlightenment.Before the merger,CNOOC aimed at the companies in the host country that bears lower political risk as the target.In the process,CNOOC then utilized smooth financing channels to complete the payment of the price.However,as the target's transaction price was high and one-time cash payment was involved,CNOOC has undertaken heavy financial burden.Therefore,the declining operating performance ensued.Thus,it is noticeable that companies should manage the timing of merge and carefully choose goal enterprises.Moreover,it should not be neglected that suitable financial method should be implemented to drive the success of the merger,meanwhile,avoiding the significant drop in M&A performance after merger.The paper systematically dissected performance of the merger of Nexen by CNOOC,adding share price and similar comparisons to analyze this merger.But due to author's limited analyzed ability and relatively shorted sample data,the conclusion of the case needs to be observed and verified in the future.