Acquisition Risks: Cimarex Energy Company versus Murphy Oil Corporation Deal

Posted: August 26th, 2021

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Acquisition Risks: Cimarex Energy Company versus Murphy Oil Corporation Deal

Risks Associated With the Deal

The first risk is the time needed for completing the deal. Once the deal is announced, the process should begin immediately or within the shortest period. However, the deal is at risk when it is pushed forward for a long time, as investors are likely to lose on their returns that were already on the long spread (McDougall & Boyle 269). Equally, the merger or acquisition time frame also affects the value of the dividends that shareholders are expected to earn (272). For instance, when dividends are supposed to be paid within the period of the deal and it is eventual postponed, the returns for arbitrageurs are negatively or positively affected depending on the existing situations. Therefore, the changes between the respective companies in the midway the deal are critical as their influence directly affects the overall situation of investment in the merger.

Regulatory Issues/Antitrust Issues amongst Shareholders

Government regulatory issues, such as prolonged scrutiny and resistance against the merger by government authorities, endangers the completion of the deal. The reason is that policies governing the acquisition and merger may be unfavorable for the proposed deal (272).  Equally, cases of shareholder base complications arising from disagreement with the owners of share structure in the acquisition could affect the closing of the deal. Similarly, the case is worse when antitrust issues are involved for a publicly-traded, and a company is operated internationally (271). In such a case, the company may need to file to several antitrust authorities, further prolonged by the approval by the government (271). Thus, this could affect the timely completion of the deal.

Works Cited

McDougall, J. & Boyle, P. Corporate Finance: Investment and Advisory Applications. Publisher: CreateSpace Independent Publishing Platform, 2017. Print.