Case analysi of Saudi Arabia's Ramco Acqusition of 50% of the Malaysian Petronas's Refinery and Petrochemical Integrated Development (RPID) project

Introduction

In the present business environment, which features a constant increase in competition, shifts in profit margins, and rapid changes in technologies, businesses have recognized that mergers and acquisitions (M&A) are faster ways of growing. In terms of definition, M&A is the coming together of two or more companies as a single unit, including combining their assets and debts, in order to become a single company. Due to M&A, the companies might be forced to lose their legal entities in order to create new ones or form the combination based on the legal entity of one of the present companies. In some cases, the combination entails a company obtaining the majority shares of another company. Such a form of merger is what is known as an "acquisition." In essence, it should be pointed out that in M&A, there are two parties (or more in some cases) that come into the transaction: the buyer (the acquirer) and the seller (the target firm being acquired). Over the years, researchers have had a great deal of interest in understanding why companies prefer to grow by merger, the form of merger they want most, the factors that influence the overall financial performance of the merging companies, and the relationship between the type of merger and performance following such transactions. From a review of the historical development of mergers, it is evident that numerous kinds of mergers have been employed for different reasons with varying performance outcomes in varied periods (Devos et al., 2012; Ghosh, 2001; Linn & Switzer, 2001; Powell & Stark, 2005; Uddin & Boateng, 2009).

Irrespective of their types or motives, the basic objective of M&A is to help companies generate a value that is higher than the one they generate on their own. That is to say, the value of the firms when combined must always be the sum of the values of the individual firms or more. From most of the empirical studies on this subject, it has been discovered that M&A has not always yielded the desired success in line with expectations, and the main factor that results in such poor performance is the company’s value being inaccurately determined (Agrawal et al., 1992; Bruner, 2002; Brotherson et al., 2014).

When it comes to financial theory, valuation is one of the most complex topics. Determining the realistic and accurate value of companies in M&A has a huge effect on both the negotiation process and the actual performance of the company following the merger (Rhodes et al., 2004). In different studies, it has been demonstrated that M&A often results in failure or creates a situation in which the target firm is paid more than its actual value due to errors that arise from determining the fair and accurate value of companies involved in the transaction. The outcome is that it reduces the expected synergy following the M&A. In terms of definition, synergy is the expected added value that is generated when the two companies combine, creating opportunities that these companies would not have if they operated independently (Devos et al., 2012; Shleifer & Vishny, 2003; Damodaran, 2005).

In line with the above understanding, this research paper is designed to analyze the recent energy deal between Saudi Arabia’s Aramco and Malaysia’s Petronas that sees Aramco acquire 50% of Petronas’s Refinery and Petrochemical Integrated Development (RPID) project. To achieve this objective, this case paper is divided into five sections. The first is an introduction to the research scope and objectives. This is followed by an overview of the deal in question, the companies involved, valuation methods for M&A, theories on M&A, and the issues that arise from M&A. The third section is the status report on the M&A in question, followed by a case study on the companies involved, while the final section is the research conclusion. 

Overview

Mergers and acquisitions in Malaysia in review (2013–2017)

Duff and Phelps, a global valuation and corporate finance adviser, noted that since they started tracking M&A in Malaysia in 2013, there have been recorded cases of 408 M&As in the country from 2013 up to June 2017, with the inbound deals covering 60% of the total deals (Chester, 2017). In 2017, there was an uptick in deals, with the value of deals increasing by 30% on a year-on-year basis, seeing a value of US$20.3 billion (RM82.82 billion) in 2017, compared to the 2016 value of US$15.6 billion. The company noted that the 2017 deal is the largest it has ever recorded for any given year since it started tracking M&A in Malaysia in 2013 (The Star Online, 2017).

The deal

According to reports, the majority of deals in 2017 came from the energy sector, and of all the deals in this sector, the largest was the acquisition of the Refinery and Petrochemical Integrated Development (RAPID) project by Aramco, the national energy company of Saudi Arabia, from Petronas, the national energy company of Malaysia. In this deal, Aramco paid US$7 billion to acquire a total of 50% of the project.

According to Saudi Aramco (2018), the company described it as a joint venture between two of the most successful national oil companies in the world that already have a good global presence, which will allow them to combine their resources, experience, technologies, and expertise for the benefit of the two companies. Additionally, the deal allows the two companies equal ownership and participation in the operations of the new refinery and other selected petrochemical facilities that are part of the Refinery and Petrochemical Development (RAPID) project located within the Pengerang Integrated Complex (PIC), in the southern state of Johor, in Malaysia.

Through this collaboration, the two companies will be responsible for the smooth running of the refinery. For Aramco, it will supply 50% of the crude livestock required in the refinery, with the option of increasing the supply value to 70%. On the side of Petronas and its affiliates, they will supply natural gas, power, and other utilities. The right to offtake the production by the joint venture will be shared by the parties on an equal basis. Further analysis indicates that the refinery, which has a capacity of 300,000 barrels of crude oil per day, will be used for producing a range of refined petroleum products, which will include diesel and gasoline, in line with the fuel specifications of Euro 5. The refinery will also be used for producing feedstock for the integrated petrochemical complex, which has the capacity of turning out 3.5 million metric tons of petrochemical products per year (Petronas, 2018).

As of the time of this report, 87% of the RAPID project has been delivered, with the refinery start-up expected to be in the first quarter of 2019.

Saudi Aramco: 2016 annual review

From its 2016 annual review, key figures indicate that the company has a total capacity of 10.5 million barrels per day (bpd) for crude oil production and a total of 13.5 million bpd for its total hydrocarbon production (Saudi Aramco, 2016). The company’s upstream review shows it is transforming potentials into opportunities. It attained a new record in 2016 with an averaged production of 10.5 million bpd and also produced a record level of sales gas, which averaged 8.3 billion standard cubic feet per day (scfd). On their own, the hydrocarbon reserves of the kingdom represent potential energy, and the transformation of this potential energy demands that the best practices, technologies, and people be employed. This is what Aramco has done over the years, delivering long-term value for the company and enabling the economic development of countries across the world (Saudi Aramco, 2016).

Figure 1: Growth of gas reserves

Source: Saudi Aramco (2017).

Figure 2: Crude oil production

Source: Saudi Aramco (2016)

As of 2016 year-end, the company had a recoverable crude oil and condensate reserve standing at 60.8 billion barrels, with its gas reserves growing to 298.7 trillion standard cubic feet (scf). In the same year, two new oil fields were discovered by the company, bringing the total of its oil fields to 130 (Saudi Aramco, 2016). This total figure represents some areas that are considered subdivisions of the larger fields, with these areas being part of the company’s continuous geographical structures.

In terms of oil production, it was stated in Aramco’s 2016 that the company's investment in the upstream, which ranges from exploration to production and processing, is geared towards ensuring that it maintains its supply flexibility and its position as the world's leading energy brand, enhancing its enabling role with respect to stabilizing oil suppliers in the future (Saudi Aramco, 2016). The company was able to maintain its spare oil production capacity by ensuring that the mix of crude oil grades was optimized from a balanced portfolio of both young and mature reservoirs.

Figure 3: Crude oil production

Source: As readapted from Anji et al. (2016)

For stakeholders (especially investors), the financial statements of a company are very crucial because they do present them with a view of the company’s actual worth. It is something that companies continually disclose at the end of the year to show how they have been performing. However, this is not the same with Aramco. It is neither a public company nor does it maintain any publicly traded stock within any capitalized market, and as such, it doesn’t release any financial details (revenue, debt, etc.) about its operations, making it impossible for the stakeholders to know how much the company really makes or how much it is really worth. Additionally, it is even hard for anybody to know what is meant when they talk about the net income of the company. The residual claimant on the company’s economic value is the Kingdom of Saudi Arabia, and how it receives such claims isn’t much of a concern. It could be in the form of dividends, taxes, or capital appreciation, or the company might just be helping the kingdom with some inland projects (Matt, 2018).

Estimates from the financial analysts show that Saudi Aramco generated revenues higher than Apple Inc. and Microsoft combined in 2014, before experiencing the work oil crash, which also started in the middle of the same year. However, the performance of the company in the energy industry has long been considered a black box because its advisers are entangled with the Saudi state (Anji et al., 2016). Added to the responsibility of financing the majority of the spending by the Saudi government, Aramco is also a big domestic employer, constructing hospitals, schools, and stadiums in the Islamic state. This makes the disclosure of the company’s core energy activities a highly complex task. Although the company is said to be organizing its reporting in line with the standards of multinationals in the energy industry that disclose earnings and revenue generated, as of the time of writing this report, such information has not been made available by the company (Anji et al., 2016).

Petronas Malaysia: 2016 annual review

Datuk Manharlal Ratilal, the Executive Vice President and Group Chief Financial Officer of Peronas, noted that 2016 was a challenging year for the company and the energy industry in general, but the effects of the reduced oil price were softened by the company’s effective cost optimization and improved operational performance (Petronas, 2017).

For the 2016 financial year, the company’s revenue stood at RM204.9 billion, which represents a 17% decrease from the 2015 position of RM247.7 billion, and the primary reason for this was the lower average price recorded across the majority of the product groups due to downward movement of the major benchmark prices, added to reduced sales volume for the company, mostly from crude oil and condensates, as well as other petroleum products.

Figure 4: Crude oil production

Source: Petronas (2017)

The effect of the weakening ringgit against the US dollar in 2016 also meant that the results of the reduction in revenue were partially offset. The Malaysian ringgit averaged RM4.15 for US$1 in 2016, against the RM3.90 it averaged for the same value of dollars in 2015. In 2016, the group also had better operational performance, which helped cushion the impact that lower revenue has on the company for the same year. When compared with the 2015 records, the sum of the total upstream production in 2016 increased by 3%, mainly due to the increased growth of both the company’s local and international operations (Petronas, 2017).

Figure 5: Crude oil production

Source: Petronas (2017)

There was a 12% increase in Petronas’s profit after tax (PAT) to RM23.5 billion, mainly driven by the lower cost of operations discussed earlier, reduced tax expenses, and net impairment on assets. For the same year, earnings before interest, tax, depreciation, and amortization (EBITDA) stood at RM70.4 billion, which is a 7% lower value than the value obtained in 2015, mainly as a result of lower oil prices (Petronas, 2017).

In terms of financial position, the company Petronas had solid, robust liquidity. As of December 2016, the company’s total assets were RM603.3 billion, which is higher than the 2015 value of RM591.9 billion (Petronas, 2017). There was an 8% increase in the company’s property, plant, and equipment, mainly due to the continuous investments made by the company in upstream and downstream projects, geared towards ensuring the overall long-term sustainability of its businesses. For cash funds and other investments, there was a slight decrease from the 2015 position of RM136.7 to RM131.8 in 2016. Cash flows from operating activities also decreased by 23% to RM53.8 billion in 2016, mainly due to the lower average price of petroleum products, but this was also offset by lower taxes paid (Petronas, 2017). For 2016, other cash inflows included revolving credit facilities by the subsidiaries for capital investments and the drawdown of loan terms.

In the same year 2016, capital investments totaled RM50.4 billion, with 52% of this investment pushed into the Refinery and Petrochemical Integrated Development (RAPID) project, which is the main topic of discussion in this paper. Of these investments, 80% were made in Malaysia, while the outstanding 20% were pushed abroad (Petronas, 2017). There was a 5.4% decrease in the group’s ROTA for 2016, in line with the lower profit before tax (PBT) obtained, while the ROACE increased by 5.3%, in line with the higher profit after tax (PAT). For the gearing ratio, there was a slight increase from the 2015 position of 16.0 to 17.4 in 2016 as additional drawdowns of borrowings were recorded in the same year (Petronas, 2017).

Motives for merger and acquisition

The majority of the literature on M&A has focused on the motives. Depending on the views adopted and the theoretical lens, reasons for M&A include reducing costs and enhancing revenues, market imperfection, and the hubris of the managers (Seth et al., 2000; Trautwein, 1990). Overall, the goal of efficiency in businesses is to reduce the cost of production or market expansion in order to enhance revenue by penetrating new markets, and these are some of the most frequently mentioned motives when it comes to M&A (Kelly et al., 2003; berg, 2004), and these motives are in line with the horizontal acquisition of firms in the same or related sector. In line with Carpenter and Sanders (2007), motive encompasses the reduction of risks, increasing market power, and other synergies in order to reinforce an assumption of the rational that defines most of the motives for acquisition. In any case, empire building and hubris motives are based on the view that managers plan acquisitions for their own personal interests (Grinstein & Hribar, 2004; Trautwein, 1990).

Different kinds of motives have been linked to different trends (Weston & Weaver 2001) and also to different forms of M&A. Before and during the course of the 1970s, numerous companies adopted the M&A strategy for diversification. Nowadays, the advancement and acquisition of technologies do present companies with varied and unique resources or knowledge (Chen, 2008; Graebner et al., 2010; Hennart & Park, 1993; Prabhu et al., 2005; Puranam et al., 2006). On the other hand, increased internationalization of M&A does show that it is now being used as a motive for market entry. Vertical acquisition involves acquiring upstream businesses in order to ensure sustainable quality raw material supply, while downstream acquisitions are done with the motive of accessing consumers or making sure that the company’s distribution and services meet set standards (Argyres, 1996; Dez-Vial, 2007).

Additionally, there is another common feature of motives for acquisition, as contained in numerous studies, which is that they are company-centric, with less attention being accorded to the firm’s context. The environmental reasons for acquisition as referenced in literature focus on two major areas: 1) how the decisions of the acquired part influence connections either at the company level or at the level of contact between individuals (Haunschild, 1993; Pfeffer, 1972); and 2) how the macro-environmental factors that influence the frequency of acquisitions are viewed (Matsusaka, 1996). However, none of these environmental views puts into perspective how the company’s adaptation to change influences its networks or its decision to go into acquisition.

Valuation methods in mergers and acquisitions

Prior to describing the various methods for valuing M&A, it is pivotal to distinguish between "value" and "price." Price is the amount of money that a buyer pays to access a given product or service, and it might not necessarily reflect the actual value of such a product at the time of purchase (Nurhan, 2017). This is because there are variations in price, and these variations are caused by demand and supply as well as economic and political factors that influence the business process. Thus, it should be expected that the price might actually be higher or lower than the value of the product being paid for. This is also the case in M&A, as there might be a significant difference between the actual value of a company and the price the acquirer is willing to pay for it. Thus, the main point should be how the realistic value of the company should be determined. This is because the more accurate and realistic the determined value is, the more realistic and accurate the price that will be paid for it will be. Different methods are employed in business valuation, and the method employed reflects the conditions surrounding the M&A deal. They are as discussed below.

Balance-sheet-based methods

In this method, the approach attempts to determine the value of a business by assessing the value of the company’s assets through its balance sheet. This is a traditional approach that is based on the principle that the value of a business is determined by the assets that the business owns, irrespective of their future. In this method, intangible assets such as brand names, knowledge, competence, and patents are ignored (Gabehart, 1998; Damodaran, 2005). This method includes adjusted book value, book value, replacement-cost value, and liquidation value.

Income statement and market-based methods

In this method, the value of a company is determined by considering the company’s market data and income statement instead of looking at the balance sheet (Nurhan, 2017). These data include the market price of the company’s shares, the earnings-to-price ratio, and the price-to-sales ratio.

Discounted cash flow method

The basic valuation employed in M&A is the discounted cash flow (DCF) method, which is based on the theory of capital budgeting. This method entails an attempt to determine the value of a company by computing the present value of its cash flow against the company’s operational life (Schill et al. 2008; Brotherson et al. 2014). While the previous methods discussed looked more into the company’s current and past value, the DCF method focuses more on the company’s future performance and associated risks. Although M&A is a strategic investment decision, it is more complex than other forms of investment because, for a typical investment, the risks are similar to the company’s current investment; for M&A, other factors besides the company’s assets must be taken into consideration, and as such, the decision to go into M&A must follow highly scrupulous analysis.

Valuation issues in mergers and acquisitions

From the discussion above on valuation method, it is clear that a number of valuation issues can emerge in M&A, which include misvaluation of the target, issues with the valuation method employed, and overestimation of the potential synergies from such a deal.

Valuation issues can lead to the actual failure of the new company because the results of an incorrect valuation entail paying more or less for the actual value of the target firm. In the event that the incorrect price is paid for the target company, attaining the desired outcome of the new deal will become more difficult (Fiorentino & Garzella, 2015). A good example will entail the purchasing company paying too high a premium for the target. Normally, the premium for a target is based on the expected synergy from combining the companies (Shusta, 1999). As such, if the bidding company pays a too-high premium for the target, it will be paying a significantly high price for the target, and the consequence will be that the synergy will be less manageable with respect to attaining desired profit and revenue. Paying a too-high premium for a target can arise from an unrealistic valuation of the premium. For the same argument above, issues with the valuation method also fit into this category. Based on the earlier discussions, there are different kinds of valuation methods, and each of these methods has its own advantages and disadvantages. There are also associated issues with the different valuation methods, and as noted by Price (2013), these valuation issues can lead to the failure of a portion of the acquisition. Information asymmetry and the disrupted flow of information are another issue in this dimension. The level of difficulty involved in evaluating the target can be increased by information asymmetry (Chemmanur et al., 2009). A disrupted flow of information entails the acquirer having the view that the target company didn’t share all the vital information. Thus, assessing the realistic and true value of the target company becomes more difficult, potentially leading to the failure of the new synergetic company.

Status Report

Petrolian Nasional Bhd (Petronas) shared on the 25^th of January 2018 the progress of the development of its US$27 billion (RM105.3 billion) Pengerang Integrated Complex (PIC), which had an 84% completion rate as of the end of 2017. In accordance with the head of stakeholder communication and risk management at Petronas, Datin Anita Azrina Abdul Aziz, the development of the 300,000 barrel per day (bpd) refinery complex, which is part of the company’s $16 billion Refinery and Petrochemical Integrated Development (RAPID) project that is situated on a 6,242 acre site, was 94% complete (Adam, 2018).

Datin Anita was speaking during media familiarization to the site on January 25, 2018, and added that the refinery will handle more mid-sour crude like those coming from the Middle East (the actual location of Aramco’s reservoir, which will handle 50% of the refinery's operations with an opportunity to increase the livestock to 70%) (Adam, 2018).

Additionally, it was noted that Petronas is still working through the details of the actual percentage of crude supply that will be sourced from Saudi Aramco under the acquisition agreement between the two companies in 2017, as well as the mechanism that will be employed for pricing the supply (Adam, 2018).

The petrochemical complex and associated steam cracker plants under the Rapid project, which has an annual production capacity of 2,640 kilotonnes of petrochemicals and 3 million tonnes of feedstock, were 68% and 91% completed as of December 2017. Then, PIC is also home to five other associated facilities. Out of these 5 facilities, the company’s raw water supply project (Pamer) started operations in July 2016, and it channels 30 million liters of water per day to the state reservoir of Johor at Sungai Lebam while channeling about 230 million liters per day to the PIC site. For this project, an intake station, a dam, and a booster pumping station were constructed, Anita said (Adam, 2018).

The company’s 1,220 MW Pengerang Cogeneration Plant, which it wholly owns, began operations in October 2017 and contributes 400 MW to the national grid. As of the time of the media's familiarization, it was gathered that Petronas was producing over 900 MW and that it planned to increase its supply to the national grid to over 600 MW (which is the full capacity of the company’s supply outside of its facilities). On a similar note, Petronas has a 3.5 million tonne-per-annum regasification terminal 2 (RGT2) at the same site, which started commercial operations in October 2017. This RGT2 is actually a joint venture between the Johor state government, Petronas, and Dialog Group Bhd. (Adam, 2018).

Basically, the above analysis shows that the RAPID project, which is an M&A between Petronas and Saudi Aramco, will be one of the last projects to go into commercial operation at the facilities (Adam, 2018). Even when it comes into full operation, there are still uncertainties over the volume of livestock that will be supplied from Saudi Aramco to the facilities and the price of such a supply.

Case Problem

Undervaluation of the RAPID project led to underpayment.

From the agreement, it was pointed out that Saudi Aramco will be paying US$7 billion for a 50% stake in the project, but the value of the project, as pointed out by Datin Anita during the media familiarization, is US$16 billion. That is to say, Saudi Aramco is actually paying less for the value it is getting because a 50% stake (representing half of the entire project) should have been valued at US$8 billion. There are a number of reasons why such might have occurred, which include currency fluctuations, poor assessment of potential risks (such as the risk of an increase in the costs of materials used for the project), and poor calculation of overhead. Basically, all revolve around poor valuation.

This is now a case between the two companies because, while the agreement highlights that Saudi Aramco will provide 50% of the livestock to be refined with a room for an increase to 70% (based on the 2017 agreement between the two parties), it was noted by Anita in 2018 that both parties are still ironing out the volume of livestock Saudi Aramco will supply for refining and the price for such a supply. Thus, there are already issues with the initial agreement before the project actually goes into commercial operations. As time goes on, the cost of the project might continue to increase. As Saudi Aramco has already paid out 50% of the value of the project, there are also issues of who will bear the added costs and whether allowing only Petronas to bear the added costs reflects a fair and realistic valuation.

Thus, this raises a number of problems for both parties and could lead to potential conflicts, legal battles, and the failure of the M&A. Earlier on, it was pointed out that Saudi Aramco has never released its financial performance or standing in the past. Thus, one could easily conclude that Petronas (which has been doing this) was actually on unfavorable or unfair ground during the negotiation. This is because Saudi Aramco can model its negotiation strategy on Petronas’s financial performance, while Petronas will have no reference with respect to Saudi Aramco’s financial performance.

Over expectations from the synergy.

Another issue that might arise from this deal is the synergy not being able to yield the expected results. Although this is unlikely, it is still vital to put that into perspective. In the event of such an outcome, one must also ask questions such as, "Who bears the loss?" Will existing agreements become void? How should the new synergy respond? and so on.

Reference

Adam, A. (2018). What’s completed and not in Petronas’ US$27b Pengerang project. Retrieved from: http://www.theedgemarkets.com/article/whats-completed-and-not-petronas-us27b-pengerang-project

Agrawal, A., & Jeffrey, J. & Gershon, M. (1992). The post-merger performance of acquiring firms: A reexamination of an anomaly. Journal of Finance, 47(4), 1605-2147.

Anjli, R., David, S. & Neil, H. (2016). Saudi Aramco prepares to publish its accounts for first time. Retrieved from: https://www.ft.com/content/b4c92832-8af0-11e6-8aa5-f79f5696c731

Argyres, N. (1996) “Evidence on the role of firm capabilities in vertical integration decisions,” Strategic Management Journal, 17: 129–50.

Brotherson, W. T., & Eades, K., M., & Harris, R., S. & Higgins, R., C. (2014).Company Valuation in Mergers and Acquisitions: How Is Discounted Cash Flow Applied by Leading Practitioners?. Journal of Applied Finance, 24(2).

Brotherson, W. T., Eades, K., M., Harris, R. S. & Higgins, R. C. (2014).Company Valuation in Mergers and Acquisitions: How Is Discounted Cash Flow Applied by Leading Practitioners?. Journal of Applied Finance, 24(2).

Bruner, R. F. (2002). Does M&A pay? A survey of evidence from the decision-maker. Journal of Applied Finance, 12 (1), 48-68.

Carpenter, M.A. and Sanders, W.G. (2007) Strategic Management: A Dynamic Perspective. Upper Saddle River, NJ: Pearson Prentice Hall.

Chemmanur, T. T., Paeglis,  I., & Simonyan, K. (2009). The medium of exchange in acquisition: Does the private information of both acquirer and target matter? Journal of Corporate Finance, 15(5), 523-542.

Chen, S.-F. (2008) “The motives for international acquisitions: Capability procurement, strategic considerations, and the role of ownership structure,” Journal of International Business Studies, 39: 454–71.

Chester, T. (2017). Malaysia’s deal value a record in five years. The Edge Financial Daily. Retrieved from: http://www.theedgemarkets.com/article/malaysias-deal-value-record-five-years

Damodaran, A. (2005). The Value of Synergy. Stern School of Business.

Devos, E., Palani-Rajan, K., & Srinivasan, K. (2012). How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies. Retrieved from: http://rfs.oxfordjournals.org/

Díez-Vial, I. (2007) “Explaining vertical integration strategies: Market power, transactional attributes and capabilities,” Journal of Management Studies, 44: 1017–40.

Fiorentino, R., & Garzella, S. (2015). Synergy management pitfalls in mergers and acquisition. Management Decisions, 53(7), 1469-1503.

Gabehart, S. (1998). Guide to buying, Valuing and Selling Your Business, Dearborn Financial Publishing, Inc. Chicago, s.191.

Ghosh, A. (2001). Does operating performance really improve following corporate acquisitions? Journal of Corporate Finance, 7(2).

Graebner, M.E., Eisenhardt, K.M., and Roundy, P.T. (2010) “Success and failure in technology acquisitions: Lessons for buyers and sellers,” Academy of Management Perspectives, 24(3): 73–92.

Grinstein, Y. and Hribar, P. (2004) “CEO compensation and incentives: Evidence from M&A bonuses,” Journal of Financial Economics, 73: 119–43.

Haunschild, P.R. (1993) “Interorganizational imitation: The impact of interlocks on corporate acquisition activity,” Administrative Science Quarterly, 38: 564–92.

Hennart, J.F. and Park, Y.R. (1993) “Greenfield vs. acquisition: The strategy of Japanese investors in the United States,” Management Science, 39: 1054–70.

Kelly, J., Cook, C., and Spitzer, D. (2003) Unlocking Shareholder Value: The Keys to Success: Mergers and Acquisitions: A Global Research Report. Annapolis, MD: KPMG.

Linn, S. & Switzer, J. (2001). Are cash acquisitions associated with better post combination operating performance than stock acquisitions? Journal of Banking and Finance, 25(6).

Matsusaka, J.G. (1996) “Did tough antitrust enforcement cause the diversification of American corporations?” Journal of Financial and Quantitative Analysis, 31: 283–94.

Matt, L. (2018). Also earnings and volatility, late nights at the office, bad disclosure and orcas. Retrieved from: https://www.bloomberg.com/view/articles/2018-04-13/aramco-now-comes-with-some-numbers

Nurhan, A. (2017). cial Science Vol. 8, No. 5, May 2017 147 Mergers and Acquisitions: A Review of Valuation Methods. International Journal of Business and Social Science, 8(5).

Öberg, C. (2004) On Customers in Mergers and Acquisitions. Department of Management and Economics, Linköping: Linköping University.

Petronas (2017). 2016 annual report. Retrieved from: http://www.petronas.com.my/investor-relations/documents/annual-report/petronasannualreport2016.pdf

Petronas (2018). Petronas, Saudi Aramco announces the formation of their two new joint venture in Malaysia. Retrieved from: http://www.petronas.com.my/media-relations/media-releases/Pages/article/PETRONAS,-SAUDI-ARAMCO-ANNOUNCE-FORMATION-OF-THEIR-TWO-NEW-JOINT-VENTURES-IN-MALAYSIA.aspx

Pfeffer, J. and Salancik, G.R. (1978) The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row

Powell, R., G. & Stark, A., W. (2005). Does operating performance increase post-takeover for UK takeovers? A comparison of performance measures and benchmarks. Journal of Corporate Finance, 11(1-2), 293-317.

Prabhu, J., Chandy, R.K., and Ellis, M.E. (2005) “The impact of acquisitions on innovation: Poison pill, placebo or tonic?” Journal of Marketing, 69: 114–30.

Price (2013). Misevaluation: Another Explanation for the Failure of Corporate Acquisitions. Corporate Ownership & Control, 11(1), 777-788.

Puranam, P., Singh, H., and Zollo, M. (2006) “Organizing for innovation: Managing the coordinationautonomy dilemma in technology acquisitions,” Academy of Management Journal, 49: 263–80.

Rhodes-Kropf, M., & David, T., R. & Viswanathan, S. (2005). Valuation waves and merger activity:The empirical evidence, Journal of Financial Economics,77( 3).

Saudi Aramco (2016). Annual review: the many layers of opportunity. Retrieved from: http://www.saudiaramco.com/content/dam/Publications/annual-review/2016/English-PDFs/2016-AnnualReview-full-EN.pdf

Saudi Aramco (2018). PETRONAS, Saudi Aramco announce formation of two new joint ventures in Malaysia. Retrieved from: http://www.saudiaramco.com/en/home/news-media/news/petronas-aramco-announce-formation-two-joint-ventures.html

Schill, M., J., Chaplinsky, S. & Doherty, P. (2000). Methods of Valuation for Mergers &Amp; Acquisitions. Darden Case No. UVA-F-1274. SSRN: https://ssrn.com/abstract=909677

Seth, A., Song, K.P., and Pettit, R.R. (2000) “Synergy, managerialism or hubris? An empirical examination of motives for foreign acquisitions of U.S. Firms,” Journal of International Business Studies, 31: 387–405.

Shleifer, A. & Vishny, R. (2003). Stock market driven acquisitions. Journal of Financial Economics, 70(3).

Shusta, A. (1999). Are you paying too much for that acquisition? Harvard Business Review, 77(6), 190-190.

The Star Online (2017). Malaysia chalks up M&A deals worth US$11.7bil. Retrieved from: https://www.thestar.com.my/business/business-news/2017/07/18/malaysia-chalks-up-ma-deals-worth-us117bil/

Trautwein, F. (1990) “Merger motives and merger prescriptions,” Strategic Management Journal, 11: 283–95.

Uddin, M. & Boateng, A. (2009), An Analysis of Short-Run Performance of Cross-Border Mergers and Acquisitions: Evidence from the UK Acquiring Firms, Review of Accounting and Finance, 8(4). http://dx.doi.org/10.1108/14757700911006967

Weston, J. and Weaver, S. (2001) Mergers and Acquisitions. The McGraw-Hill Executive MBA Series. New York: McGraw-Hill.