Merger Integration of Multiple Equity-Owned E&P Companies
A global investment firm recognized its approach to working with its upstream oil and gas portfolio companies needed to evolve as the companies repositioned to focus on generating and distributing cash flow. Through a series of transactions, the investment firm contributed multiple oil and gas companies and additional assets under its control to a new entity. The new entity issued notes and entered into a credit agreement, the proceeds of which were used to terminate the prior borrowings of the individual operating companies. The combined company then merged with a publicly traded company to form a new publicly traded entity. We supported the substantial merger integration effort.
Approach
We were engaged to develop an “Operating Model” to provide the foundational structure, ways of working, and expectations to support an effective working relationship between the investment firm, newly formed company, and operating subsidiaries, each of which previously operated as independent companies. For the combined company to be successful, the parent company and its operating subsidiaries required a strong partner relationship focused on delivering value for the investors.
Teamwork, collaboration, clear roles and responsibilities, and focus on the critical elements of the Operating Model were required to achieve these ambitions. Our Operating Model is a framework that connects a company’s vision, mission, and strategy to results by defining how an organization operates. The Operating Model was used as a framework to determine which components – structure, process, people, technology, metrics and motivators – needed to be defined and managed at the parent company level. Other components would continue to be managed by each individual operating subsidiary. Working in partnership with the client, we helped to define:
- Shared vision, mission, strategy, and values for the group
- Organizational structure, roles, responsibilities, and decision rights
- Key performance indicators for the parent company and the operating subsidiaries
- Selected work processes (e.g., planning, delegation of authority, reporting)
We helped to identify and capture synergies from consolidation of business support functions at the parent company level. Additionally, our team provided interim support to consolidate health and safety and ESG policies, as well as to integrate finance and accounting processes, controls, and reporting.
Key Results & Outcomes
Private equity investing in the oil and gas industry has evolved. Companies no longer “build and flip” and are instead expected to generate long-term cash flow distributions. The structure created by our client provided a unique opportunity to consolidate business support functions, leverage increased scale across the supply chain, and simplify the capital structure. It also provided a vehicle to achieve the scale required for a viable public company in today’s energy market, providing an exit pathway for investors.