| dc.description.abstract | Mergers and acquisitions (M&A) occur due to shocks to an industry's economic, technological and
regulatory environment (Harford, 2005). Industry shocks such as liberalization, deregulation and
globalization force firms to seek a more competitive position in the market. With the liberalization
of the oil industry in 1994, several foreign multinationals experienced unhealthy competition and
divested from Kenya citing poor returns. These included Agip (1999), BP (2005), Mobil Oil (2007),
Chevron Kenya (2009) and Kenya Shell (2011). Chevron Kenya was acquired by Total Kenya with
assistance of the parent company. This study sought to find out the process and challenges in the
implementation of the M&A between Total Kenya Ltd and Chevron Kenya Limited. Data was
collected through interview guides administered to the management of Total Kenya Limited (TKL).
Results were analyzed through content analysis and conclusions drawn from the study. The study
found that negotiations, due diligence and valuation were conducted between the parent companies-
Total Outre Mer and Chevron Corporation of USA. Total Outre Mer first acquired Chevron Kenya
and soon thereafter sold it to Total Kenya Ltd. This arrangement shielded TKL from foreign
exchange risks at a time when financial markets were volatile. The study also found that the primary
motive of the acquisition was to acquire strategic assets that were considered necessary to compete
effectively in Kenya. The most strategic assets were the lubricants blending plant, aviation facilities
in major airports and, retail petrol stations. The acquisition placed Total Kenya as the market leader
in the petroleum industry in terms of petrol station network and market share. The company also
achieved substantial growth in sales revenue from Kes 45 billion in 2008 to Kes 120 billion in
December 2012. Paradoxically, the company moved from a profit of Kes 703 million in 2008 to a
loss of Kes 202 million in 2012. These losses were attributed to high finance costs associated with
heavy borrowing to finance the acquisition and price control by the government. These results are in
line with conclusions drawn by Cartwright & Schoenberg (2006) that M&A provide a mixed
performance. This mixed performance' can be seen in the case of Total Kenya where the company
achieved market leadership and substantial growth in revenue, but made losses for two straight
years in2011 and 2012. | en_US |
