Page 75 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 1, 2015, pp. 61-94

re-distribution, jobs creation, general economic development, economic and energy

security, and vertical integration and in contrast to a private firm unlikely to be

equivalent to the maximization of shareholder value. Thus, many of these companies

have been found to be inefficient, with relatively low investment rates.

There are three types of M&A transactions in energy, particularly in oil and gas

sector: accomplishment of growth objectives, survival and divesture. (Booz &

Company, 2009). First group of deals can be grouped as companies following growth

opportunities. Key players in the industry, especially fully integrated oil companies

are constantly looking for growth opportunities to stay competitive in the market.

Some researchers state that major oil companies choose M&A as growth strategy

when they are incapable of achieving the growth rate organically. Others argue that

management of big oil companies decide to participate in the deal even if the is no

need for the growth, just to maintain their reputation as continually growing company.

Management perceives growth as a tool that sends positive signal to the investors and

the market, as a result increasing financial performance in the short term. Divesture is

seen as second type of deals observed recently in energy industry. Oil and gas

companies are highly capitalized and require continuous capital investment in

particular in technology, research and development, and highly skilled professionals.

Companies have to divest some parts of their assets, so that they can reorganize and

focus on core activities. Independent players in engaged in upstream activities sell

parts of their business which are not related to exploration and production, to be gain

greater market share and increase competitiveness in those operations. Third type of

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