In the mid-to-late 1980s, the number of places in the world where one had opportunities for exploration and productions were limited. In the late 1990s, there were more opportunities so far as oil production and exploration of oil was concerned. Many countries were opening up, such as China, Venezuela, and countries in the Middle East. These were the sort of large-scale, capital-intensive opportunities that the merger entity would capitalize on. This is one of the reasons why Exxon and Mobil had merged to increase the scope of opportunities. By the late 1990s, the merger mania seemed to have been over amongst the major oil producers. The mergers and acquisitions in the late 1990s, resulted in many new organizations, like TotalFinaElf, Exxon-Mobil and BP Amoco Arco, to be called BP. These mergers had changed the rankings of the oil companies involved in petrochemicals. TotalFinaElf had overtaken both Exxon Mobil and Royal Dutch Shell to take the top spot. On December 1, 1998 Exxon Corporation and Mobil Corporation agreed to merge, in the world’s largest industrial merger ever, surpassing the earlier concluded BP Amoco merger. The $ 80 billion deal involved an exchange of 1.32015 shares of Exxon stock for each outstanding share of Mobil stock. Exxon shareholders would own 70% of Exxon Mobil. The combined revenues of both the companies for 1997 were $178.7 billion and the combined market capitalization was $237.5 billion. The merger was projected to generate immediate cost-savings of about $2.8 billion. Lee Raymond, (Raymond) CEO of Exxon, would be the CEO of the merged company while Mobil’s Lucio Noto (Lucio) would be his deputy. The enlarged board of 19 members would have only six from Mobil. Though Raymond projected 9,000 jobs to be cut from a combined employee strength of 122,700, analysts expected the figure to be as high as 14,000. In addition to reduced manpower costs analysts felt that there were other benefits of the merger as well. Exxon Mobil would position itself as partner of choice for nations seeking help and capital to exploit their reserves. However, many public interest organizations opposed the Exxon-Mobil merger on the ground that it would be harmful to consumers, workers, the environment, and the economy. They were of the opinion that merger would lead to anti-competitive behavior at the expense of consumers, especially in many areas where Exxon and Mobil competed directly. The merged entity would have enormous political power, with the ability to skew critical policy debates over matters such as labor standards, global warming, opening of the Arctic and other environmentally sensitive areas to oil exploration. Some felt it would be less sensitive to public demands for environmental responsibility in exploration, extraction and transport and use its bargaining power to the detriment of the environment and the owner of natural resources i.e., the public. The integration between the two was not a smooth affair as many differences existed between them. One key issue which Exxon and Mobil had to address in the implementation of the merger was cultural differences. Exxon was generally considered to be tight lipped and conservative by analysts. Whereas Mobil had a more open culture and was receptive to new ideas. Exxon’s top management had a subdued style of working, with a sharp focus on cost reduction. The company’s public relations efforts had been fairly unimpressive. Mobil on the other hand had been far more successful in handling the media. Exxon’s decision making was relatively slow while Mobil’s management was far more risk loving. The company had ventured into natural gas in the 1980s before it was popular with most other oil companies. Mobil also had shown a lot of enterprise, moving in to the politically volatile central Asian region after the dissolution of the Soviet Union. On the other hand Exxon’s oil exploration production strategy was exclusively focused on the North Sea and North America. However, there were areas where Exxon and Mobil could complement each other well. Exxon’s strengths lay in finance and engineering, Mobil’s strength was its industry’s most accomplished dealmakers and marketers. Though Raymond freely acknowledged his admiration for Noto, he stuck him with the honorific title of vice-chairman and did not give him much to do. Throughout the senior management ranks, the Mobil managers who remained generally were subordinated to their Exxon counterparts with the exception of petroleum refining and marketing. In 2000-01, Exxon Mobil’s net income was $17.7 billion and its $232.7 billion in revenues pulled it to the top of the list of Global Fortune 500 companies. Analysts felt that Exxon Mobil merger was successful and the success was not just a function of its overwhelming size and wealth. Said one, “They only have one way of doing things: the most efficient, with the least risk. They want to see the studies. If the studies are yours, they want to redo them. They have a clear line of sight to the target.” Exxon Mobil excelled in both petroleum production and oil exploration. Its vast, geographically diversified array of oil and gas properties made it the envy of the industry. However, apart from size there seemed to be other factors that contributed to its success. Exxon Mobil’s commitment to unmatched technology was one of the reasons for its success. In 2001, Exxon Mobil board announced that Raymond would continue as the CEO beyond his original retirement date of August 2003. The board did not set any specific time frame for Raymond’s tenure as CEO. It said the directors made the decision to help ensure smooth transition of management after significant changes made in the company over the past several years, including the merger of Exxon and Mobil. “The high level of change during the past three years has resulted in a delay of some executives moves required to develop the next generation of corporate management,” the board said. Analysts felt that the key issue in Exxon Mobil future growth was whether the company's penchant for centralized control would promote the entrepreneurial business of natural gas. Gas marketing was pre-merged Exxon's glaring weakness. Much of its production came through partnership arrangements in which the gas already was committed to buyers under long-term contracts. In other words, zero salesmanship was required, least of all by Exxon, which often was a passive partner in these joint ventures. Analysts felt that Exxon had so far not reaped any dramatic benefit from Mobil's high-powered gas-marketing arm. In fact, in 2001, Exxon Mobil lost to BP Amoco in its bid for the 20-year contract to build China's first LNG receiving terminal. In March 2001, BP Amoco was chosen by China National Offshore Oil Corp to do the same. Said, Nancy Vaughn, director of upstream services for Petroleum Finance Co., “Exxon now has the Knowledge of how to develop an LNG business that it probably did not have before, but the fact is, they haven't been able to make a move on any of their big projects.”

1. The Exxon-Mobil merger was one of the biggest industrial mergers ever. Do you see any synergy in this merger? 2. An analyst commenting on the Exxon-Mobil merger said, “While most mergers go wrong, this deal struck gold..…black gold.” What were the reasons behind Exxon-Mobil’s success as a merged entity?