Companies Merging

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Because there are financial crisis almost all over the world, demand in general decrease because people try to save money which cause a lot of mergers and slow down the whole global economic cycling and society ends up with recession. When it is global recession it affects even successful companies like Smith International which was based in Houston. Schlumberger is world known oil Service Company merged Smith International that used to supply oil companies with pipes and other equipment in 2010. According to Houston Chronicle article by Monica Hatcher, when Schlumberger merged Smith International, they have pulled $22 billion in annual revenue which was very competitive for Halliburton which in contrast had only $15 billion in their annual revenue, same time. As a result, this merging case of Schlumberger and Smith International was very profitable and successful.

According to the same article, it was announced that Smith International stockholders will get around 12.8 % of Schlumberger’s shares from merged stock. According to Schlumberger news, executive officer said that “exciting time for all the former Smith International employees as we aggressively expand our service offerings through the rapid implementation of the identified growth strategies while continuing to focus on our customers’ everyday needs. The quality of the integration planning process has been outstanding and everyone is looking forward to exceeding expectations.”

According to ICT source, vertical merge when the company is merging with supplier, increasing profitability, efficiency, and having power over the whole sale and retail industry. In addition, vertical merges considered to be profitable and beneficial. In my personal opinion, I think Schlumberger and Smith International is the perfect example of it

Finally, it doesn’t matter how many producers and suppliers are on the market in general the real demand will eventually adjust the equilibrium point by merging companies or bunkrupt according to current economy level. Merging is one of the natural side effects of the financial crisis.

References

http://www.guardian.co.uk/business/blog/2011/nov/29/thomas-cook-former-chief-heat-over-pay

http://www.telegraph.co.uk/finance/2871101/MyTravels-UK-boss-packs-his-bags.html

http://www.nytimes.com/2007/02/12/business/worldbusiness/12iht-merge.4570126.html

http://www.chron.com/business/article/Schlumberger-to-merge-with-Smith-International-1607162.php

http://www.ictregulationtoolkit.org/en/Section.1926.html

http://www.slb.com/news/press_releases/2010/2010_0827_smith_merger_closes.aspx