BP Amoco Case Group 1 AM Edits - 2250 Words

BP/Amoco Merger Case Group 1 Keshavaraja Alive Stephen Felkins Therese Jackson Andrea Marrical Eric Weiss Executive Summary Prior to the merger between BP and Amoco in 1998, both companies had very similar operating characteristics and performance. Both companies engaged primarily in the same three businesses and experienced close to the same percentages of revenue and percentages of operating income for each of those businesses. A key difference however waswere that BP concentrated their operations predominantly in the United Kingdom and other parts of Europe whereas Amoco concentrated their operations heavily in the United States. Furthermore, before 1992, BP experienced drastically declining†¦show more content†¦Again similar to exploration and production, Amoco operated solely in the United States. Both BP and Amoco had a very large number of retail outlets in which the companies sold petroleum products to, 8,200 and 9,300 outlets respectively. However, uUnlike exploration and production activities however, refining and marketing activities accounted for a large percentage of revenues, 81 and 63 percent respectively, but only a small percentage of company operating income, 21 and 19 percent respectively. Realizing that this segment was not very profitable in comparison to exploration and production, BP made the decision to reduce its interests in refining and marketing. The third business that both BP and Amoco separately engaged in prior to the merger was the production of petrochemicals. BP had operations for this segment more widespread than the others and distributed to over 60 countries. Amoco, on the other hand, concentrated heavily in the United States staying consistent with the other two businesses. Revenue percentages for petrochemicals were very low for both companies, but operating income percentages were as well; 7 and 11 percent respectively for BP and 16 and 16 percent respectively for Amoco. There are a few differences in the pre-merger incentive programs for executives at BP and Amoco. Prior to the merger, the compensation of Amoco executives was much