Introduction :

From the last ten years BP has got much support and acclaim for its proactive stance on environmental issues. The role of BP is usually highlighted in stark contrast to companies that have been accused of lobbying intensively against efforts to mitigate the risk of global warming. we will also debate about global environmental issues and corporate responsibilities in that respect the last ten years has also witnessed the emergence of much bigger and vast social agenda sometimes framed by the concepts of corporate social responsibility. the discussion start off with the brief overview of BP history with the current problems facing BP in the gulf of Mexico following the deepwater rig explosion which has caused what has been described as the worst U.S ecological disaster ever, the company share price has fallen steeply. this is also being said that could trigger at take over of the business by one of its big competitors such as Exxon Mobil, Shell, or even petrochina.we will also discuss the conventional reasons for the take over such as extracting cost or building extracting costs or building economies of scale along with the very real disadvantages, including those special to an acquisition of BP at this time

Company profile :
The merger with Amoco in 1998,BP Amoco plc entered the scene among the world top three oil companies. Judging by merits such as market capitalisation of 203 billion dollar revenues of 148 US billion dollar and earnings 8.4 US billion dollar.BP was in year 2000 surpassed by the other oil majors Exxon Mobil and shell group.BP also rank top three in terms of discovered oil and gas reserves amount of 15.2 billion barrels of oil equivalents.BP products are on sale in about 100 countries and it has well established operations in six continents. The company is active in 29 countries with production operations in 23 countries.BP is the biggest producer of oil and gas in U.S and the second largest marketer of gasoline.BP got gas sales contract in more than 25 countries, refineries in 23 countries and more than 28000 service stations.BP is also a major player in chemicals 58sites world wide and solar power revenues of 200 million U.S dollar in 2000

History and context :

British petroleum origin goes back to the early 20th century and the discovery of oil reserves in Iran that lead to the formation of Anglo-Persian to secure oil supplies for the royal navy in the ist world war. In the period between world wars 1 and 2 the company expanded gradually through the construction of new refineries in Europe and Australia while exploration was carried out on a global scale in Canada South America, Africa and Papua. Following the Iranian nationalization process in the early 1950s the company was forced to expand to other areas, notably the North Sea and Alaska. The AngloIranian company was renamed The British petroleum company in 1954.It was largely for this strategic reorientation that BP was able to survive the oil crisis of 1970s.From the mid 1970s , BP strategy of diversification led to the inclusion of new business areas, such as minerals, coals and chemicals. Towards the late 1980s BP decided to change its strategy, concentrating efforts on its core activities in petroleum and chemicals After the U.K govt sold the major shares of 31.5% in 1987 BP was not very large company then and BP has vast debt and share price of only 1.85.And even though Kuwait was insisted to sell the shares back to U.K govt.BP faced a financial crisis and the company did not give the dividend to its employees in 1992.Over the years 1992-1995,the global work force was reduced from 117,000 to 56000 non core activities were sold out and BP focus on its core business:BP EX(explosion and production ),BP oil (refining and marketing ) and BP chemicals. This process was continued after john Browne was been appointed as CEO in 1995 and BP has enhance its business in new regions like Columbia , soviet union , the gulf of Mexico , Asia , Africa including new business streams of gas and power and BP solar Then the merger between BP and Amoco took place on dec 31st 1998 and it was the industrial largest merger in the history brought together two companies standing merits in the establishment of the world top three energy and petrochemicals company. Amoco has history of being the leader in the environment field.

Porters Five Forces

Analyze The Five Forces Acting On Bp. Which Of Them Is The Greatest Threat To The Company? Threat of new entrants (High)
The threat of new entrants in the oil industry is strong. BP is a market leader, but the strong growth of the industry, combined with the low costs and easy access to buyers are tempting for new comers.

Buyer Bargaining Power (Moderate)

Needs of consumers are high and there are no substitutes of motor fuels. That indicates a low degree of buyer power. Even though the brand awareness is high, because of the extreme budgets for marketing and advertisement of oil companies, brand loyalty is low. Product differentiation is low. Considering the many existing players on the market, this makes the buyer bargaining power moderate.

Supplier power (high)

Considering the large size of suppliers, the number of suppliers, and the switching costs for the independent retailers, we indicated that supplier power is strong. The leading corporations are large and they do everything from the fuel supply chain. There is a high degree of forward interigation within the industry.

Threat of substitutes (low)

Threat of substitutes of oil at the current moment is really weak mainly due to the high prices of such. Solar panels and other alternative energy include high switching costs and long waiting time, which makes them unattractive to the consumer. Although bloodies and bioethanol also exist, availability is low. Even though the threat of substitutes is weak, BP has already taken it under consideration and, as we mentioned, entered the market of alternative energy. BP is investing huge amounts into developing new technologies.

Rivalry (Moderate)
Even though there is a strong rate of growth within the industry, rivalry remains moderate due to the switching costs, size of competitors (oil companies) and similarity of those competitors. There is a high price competition, as well as any other industry. Nevertheless, there are few major market leaders and there is no place for small companies, which can not offer the same low prices.

PESTEL Analysis OF BP

One way of planning your business is to undertake a PEST analysis.1 PEST analysis involves looking at the Political, Economic, Sociocultural and Technological factors that could affect your business.

Social Forces
Social forces include, for example, changing demography and education, etc. The population in Western Europe is relatively static, but the age bands are changing. The number of older people, for example, is growing rapidly.

Technological Forces
Technological forces are changing dramatically quickly. What effects will this have on your production, marketing and distribution plans? Depending on your market, technology might either raise or lower entry barriers for competitors - or completely change the industry. As the new technology and machinery has been introduced in the oil and gas industry to get benefit, improve the efficiency and give healthy competition to the rivals.

Economic Forces
Economic forces include the effects of inflation, interest rates, tax rates, exchange rates and the euro. Even governments have difficulty predicting what is likely to happen to these - and they try to control them! Nevertheless, they will have a major impact on your business, especially if you need to borrow a large proportion of your working capital, or if you are selling overseas

Environmental Forces
Environmental forces are becoming increasingly important as more people consider the consequences of continually interfering with the ecological balance of nature. As a result, governments are legislating more to protect the environment and demanding less pollution

Political Forces
Political forces most obviously include government legislation forcing businesses to comply, for example, with health and safety, or employment, or data protection requirements. These impose costs, but often also provide opportunities.

The Reasons Why BP In Talks Of Take Over :

BP failure to stop the oil leakage of millions of gallons of crude in to the gulf of Mexico leave the biggest oil and gas producer in the U.S for its independence fight.BP have been fallen down from 34 percent since the start of deepwater rig explosion on the 20th April. That cause BP the loss of 40 billion pounds from the company value and because of this BP is cheap enough to attract acquisition interests according to the investors The decline in the market price of BP encourage the take over of it , who helps manage about $4.5 billion at Robeco Group in Rotterdam, which sold its BP holding last year. What matters now is how forceful BPs Chief Executive Officer Tony Hayward is in tackling the disaster and the aftermath, Hoozemans said and it will cost 37 billion dollar With a permanent end to the leak depending on so-called relief wells and the company also faces crimal and civil investigation in the U.S. The only real candidate, in size and with similar operations globally, would be Royal Dutch Shell BP's market value, which surpassed Royal Dutch Shell at the start of the year, has fallen to $115bn, lower than ExxonMobil at $280bn, PetroChina at $278bn and Shell at $159bn.Technically all of these companies can buy BP but all of them know what they were buying in an industry already fraught with regulatory and political risk. The huge and indeterminate cost of the oil spill clean-up, as well as damages, fines and compensation - analysts' forecasts of the cash cost to BP have ranged up to about $20bn - could spiral into tens of billions of dollars

Takeover benefits :
According to commentators like Brealey and Myers (1991) have commented that if takeovers, took place then companies have to targeted to create synergies in the form of economies of scale and of vertical integration, complementarity of resources, enhanced efficiencies and improved free cash flows. The others observers like Jensen and Ruback (1983) said about the takeovers by arguing that takeover will play as an external control mechanism by ensuring managers to not deviate from ensuring the maximisation of shareholder wealth. A sum up of this argument is that the intent to increase shareholder value, for shareholders of the target and the firm, who acquires can also drive the actual takeover activity. During the 1980s and after that the globalisation has gained pace, takeovers have been happened as a means of increasing the influence, brand name, and globally presence for corporations. In real, as the example of too many Japanese companies has been formed, and many of them became well-known more for their takeover activities than products and services (Kester, 2003).

Takeovers in regard to driving shareholder value :

We Derive from the premise of Agency theory, that considers shareholders as the principals and the managers their agents, and posits that the latter may seem to play opportunistic in pursuit of their own interests and contrary to that of the shareholders, takeovers have been seen as a controlling mechanism to organize managers whose companies are not performing well. moreover, during the 1970s and in the subsequent years, the emergence of powerful institutional investors formed a platform for takeovers targeted at increasing the stock price or market capitalisation, and in many instances, came to be seen as the sole measure of corporate performance (Lazonik and OSullivan, 2000). Another reason of managerial takeover activity is defined by the free cash flow theory (Jensen, 1986), which describes that managers of firms with unutilised lending power and high levels of sustained free cash flows at their disposal can be encouraged to undertake acquisitions (even if unrelated) as an replacement to paying out cash dividends to shareholders or using these funds in potentially low value-yielding and unprofitable internal projects. In this situation, Jensen describes how during the 1980s, buoyed by the substantial free cash flows, managers in the oil industry undertook extensive diversification programs.

Some relative examples of this are Mobil acquiring Marcor (retailing), Exxon taking over Reliance Electric and Vydec manufacturing and office equipment, respectively, and Amoco buying Cypress Mines Mining. However, the theory further describes, using the substantive evidence of the earlier examples, that very often, these takeovers may fail to create or may even destroy value, reflecting a breakdown of internal control processes and prevalence of organisational policies that are wasting resources. In such a scenario, these firms may themselves become takeover targets for an acquirer aiming to provide better economic purpose and enhance shareholder value. Hay and Morris (1991) refer to this as allocational takeover and hold that the acquirer would aim to reallocate resources and make better use of them, thus improving the performance of the target company post-merger.

Difficulties and problems of takeovers:

Taking the previous discussion further, we will discuss that there are existence of a strong rationale and numbers of intentions behind takeover activity, both for managers and shareholders, even though it is not necessary for them to be aligned on the reasons for transaction. However, it is known from the previous evidence that the success of takeover activity seems to suggest that in a most of cases, these transactions can fail to increase shareholder value when these are been measured in terms of stock market performance, industry average returns, revenue growth post-merger and other key financial metrics (Pautler, 2003).it is Depending on the benchmark chosen to define success, there is a possibility that a takeover may be financial failure, particularly when the acquirer paid more money, but still be successful in a societal sense by creating more diverse choices for customers, better or cheaper products, and reducing the use of resources in producing the output. Discussing the same conversation, Bower further describes that the frontend of the takeover process may have not received thorough thinking and planning, leading to ineffective integration of assets and resources later. In such a situation, managers are faced with salvaging whatever they can in the post-merger period. It is said that the likelihood of bad ideas and bad implementation can be significantly reduced if the acquiring firm has expertise with the type of assets it is acquiring. This implies geographic market extension and capacity expansion deals are more likely to succeed than cross-border transactions done with the intent of corporate diversification (Harbison et al, 2001).

The main disadvantage that is evidence for the acquirer after the takeover is to assuming all the liabilities of the target firm, which can create a plethora of potential exposures and a need for adequate coverage (Hollyday, 1995).so that It has been, therefore, suggested that risk managers should perform rigorous pre-acquisition due diligence into the target companys operations including regulatory compliance, legal, tax, and accounting issues. Beyond the implication of liability claims for the current attractiveness of the target company, there can be long-term adverse impact on the companys profitability or it may have inadequate reserves and insurance coverage. Areas of liability can include first party exposure, third party liability, statutory liability and regulatory compliance.

The intent of driving shareholder value with BP as a takeover target :

In a takeover, the aspect of shareholder value assumes two perspectivesthat of the acquiring and the target firm. Even though BP has spent up to US$10 billion in the previous years on paying dividends to shareholders at an average of 9%, when benchmarked with a peer group of industry supermajors, the company ranks at the bottom on Total Shareholder Returns (TSR). In 2009, more than a third of BPs shareholders voted against the long-term executive bonus plan and the 15% discretionary bonus proposed for directors, as the company had not met the TSR requirements previously specified in the bonus plan. However, the motion was still approved by the companys board citing operational performance as the reason for awarding executive management (White, 2009). These recent developments indicate a high degree of shareholder-manager or principal-agent conflict that has been brewing within BP. Moreover, in the aftermath of Gulf oil spill, BP executives have been criticised for cutting corners on safety norms in order to catch up on the delayed well schedule, meet their deadlines, which would have been linked to their bonuses. Such criticism has not been for the first time and investigations into the 2005 Texas City refinery had established a disturbing regularity of accidents unseen among its peers (Steffy, 2010). It may appear from this that in their quest to secure personal interests (bonuses), the management has jeopardised long-term shareholder interests.

Following the disastrous explosion on its rig in the Gulf, as the oil spill continued, shares of BP took a severe blow. By 3rd June, the company had lost almost US$62 billion in market value and its m-cap stood almost one-third lower than that of its European counterpart, Royal Dutch Shell, stoking speculation that the latter may be contemplating a takeover once again (The Economist, 2010) given the sharp erosion in BPs share and an attractive acquisition price of ~US$6/barrel for its proven reserves. Further, given the strong conventional rationale of creating synergies and new growth opportunities rapidly and increasing shareholder value, arguably, there exists a lucrative opportunity for an industry rival like Shell or any large oil and gas company looking to consolidate and strengthen its position globally. The question that arises is: what problems and disadvantages may exist for the acquirer? In answering the question honestly , one has to think about the immediate, short-term, and long-term implications of the oil spill for BP. Understandably, the easiest to predict and assess but of limited utility in deciding about a takeover, has been the immediate term impact. The company has announced on August 9th, BP agreed that they had already spent US$6.1 billion, including in oil spill response, and in cementing the damaged well, and settling initial claims and federal costs. In the short run , company forecasts, bearing the various results of the disaster it would cost US$32 billion, and this amount will be gained by selling US$30 billion of non-core assets in the next eighteen months. It is also estimated , BP will be liable to pay ~US$18 billion, at a rate of US$4300 per barrel, in fines according to the federal law for causing the spill. But , according to analysts and industry observers it is quite early to determine the extent of liability and related damage claims, which can also be rise sharply .

CONCLUSION
We have discussed about the BP and the current problem faced by the company as a result of deepwater rig explosion in the gulf of mexico because of this problems there is talks and issues been raised of the take over of the company by its rivals like shell . Exxon mobil and petrochina.The talks of take over started beause of different reasons.the main reason is that there is huge amount needed to stop the leakage and to clean the water The huge and indeterminate cost of the oil spill clean-

up, as well as damages, fines and compensation - analysts' forecasts of the cash cost to BP have ranged up to about $20bn - could spiral into tens of billions of dollars and due to that lost BP share price has been fallen

References
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Gerstein, J. (2010) The Gulf of Mexico oil spill by the numbers, The Daily Green News blog, April 30. Available at http://green.yahoo.com/blog/daily_green_news/333/the-gulf-ofmexico-oil-spill-by-the-numbers.html. UPI (2009) BP-Alaska deals another spill, December 31. Available at http://www.upi.com/ Science_News/ ResourceWars/2009/12/31/BP-Alaska-deals-with-another-spill/UPI92901262277000/. Urbina, I. (2010a) In Gulf, it was unclear who was in charge of oil rig, June 6. Available at http:// royaldutchshellplc.com/. Urbina, I. (2010b) Despite moratorium, drilling projects move ahead, New York Times, May 23. Available at http://www.nytimes.com/2010/05/24/us/24moratorium.html?hp.

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