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The Effects of Mergers and Acquisitions on Financial Performance: Case Study of Acquisition of BG Group by Royal Dutch Shell

DOI: 10.4236/oalib.1107258, PP. 1-21

Subject Areas: Business Analysis

Keywords: Acquisition, Post Bid Defenses, Estimation Window, Event Window

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Abstract

The aim of this paper is to examine the idea of Royal Dutch Shell’s acquisition of the BG Group and how it has created the world’s largest natural gas liquefied business. For more than ten years, it was the first mega-merge in the sector for $54.0 billion in 2016. The study will explain the critical analysis of the motivations behind each deal for acquiring BG Groups by Royal-Dutch multinational Shell PLC. The paper also analyzes various Financing methods, similarities and differences, and relating those differences to the acquirer’s financial strategy and previous financial position. Various Post Bid Defenses that a target company could employ to repel an unwanted bid approach and explain the shareholder value after the Acquisition occurred. Lastly Estimation Window, Event Window, Synergies and Valuation from the study, it is clearly explained that the combined firm’s valuation would surpass the two firms’ sum by $56 trillion, which means synergies with performance. In addition, cash flows, sales and primarily operating cost synergies are projected to be $30 trillion and thus generate value through fusion theoretically. Clearly, Royal Dutch Shell should try to diversify from being highly dependent on oil to gas though the Acquisition is a successful event. Some experts expected a very long-term disappearance of the fossil fuels industry. Royal Dutch Shell acquired BG Group at a market downturn that has significantly supported the company’s LNG portfolio and helped the company to increase its size.

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Kalam, K. K. (2021). The Effects of Mergers and Acquisitions on Financial Performance: Case Study of Acquisition of BG Group by Royal Dutch Shell. Open Access Library Journal, 8, e7258. doi: http://dx.doi.org/10.4236/oalib.1107258.

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