A Trustbusting Boom

This Week's Trend In Brief:

• Since ExxonMobil announced its acquisition of Pioneer Natural Resources for $59.5 billion in October 2023, at least eight other energy companies have followed suit, totaling about $177.3 billion in transactions, including Chevron’s plans to acquire Hess for $53 billion.
   

• While many in industry celebrate these mergers, they come as America finds itself in a “new trustbusting era” whose policy direction is primarily shaped by the twin tides of populism and progressivism amidst voters’ angst over the high costs of food and energy.
   

• Indeed, Exxon’s plans to acquire Pioneer already elicited a demand from nearly two dozen U.S. Senate Democrats that the Federal Trade Commission (FTC) investigate the merger and others like it, and the FTC launched a probe in December 2023.
   

• These demands are being amplified by environmental activists raising concerns over the “consolidation of resources and power” while ramping up pressure on lawmakers and regulators heading into the 2024 election.
   

• This scrutiny means energy industry public affairs professionals and the companies they represent must approach such transactions smartly, assessing where opposition and pressures are likely to come from and ensuring their corporate strategy has a stakeholder engagement plan to overcome objections from the court of public opinion.

Digging Deeper:
 

Since ExxonMobil announced its acquisition of Pioneer Natural Resources for $59.5 billion in October 2023, at least eight other energy companies have followed suit, totaling about $177.3 billion in total mergers, including Chevron’s plans to acquire Hess for $53 billion soon after. The mergers followed several years of higher oil prices that led to considerable increases in profit for energy companies and range from oil and gas producers to companies operating in the emerging carbon capture industry. While ExxonMobil argued the merger was “nothing but upside for our economy and our environment” because the company “has the resources to get more out of the ground and do it at vastly improved emissions levels,” the merger and those like it come as America finds itself in a “new trustbusting era” whose policy direction is primarily shaped by the twin tides of populism and progressivism amidst voters’ angst over the high costs of food and energy.
 
Indeed, about one month after Exxon announced its plans to acquire Pioneer, nearly two dozen Democrats in the U.S. Senate demanded the Federal Trade Commission (FTC) investigate the energy sector mergers. Led by Sen. Elizabeth Warren (D-MA), the lawmakers argued Exxon’s acquisition of Pioneer and Chevron’s plans to acquire Hess risk reducing output throughout the United States while harming independent operators and suppressing wages. The letter also claims major mergers like these “could harm competition and lead to even higher prices for Americans,” including at the pump. Urging the FTC “to stand up to Big Oil,” the lawmakers argued, “the FTC should be investigating the past anticompetitive mergers of Big Oil conglomerates like ExxonMobil and Chevron to determine whether these energy giants should be broken up once again.”
 
Several months later, Lina Khan’s FTC launched an investigation into Exxon’s acquisition of Pioneer, asking for additional details for the sale in December 2023. Sen. Chuck Schumer (D-NY) celebrated the announcement, urging the FTC to “take a hard look at Exxon’s blockbuster merger and block it if it would lead to higher prices, hurt competition or force families to pay more at the pump.” The Biden Administration has taken a strong stance against mergers, and the FTC “has taken action in court to challenge 11 deals, including acquisitions by Meta Platforms and Microsoft.” The investigation into Exxon’s merger is the latest example of the scrutiny facing companies eying such transactions in the current political and regulatory environment. Indeed, according to Khan, the FTC’s job is “to prevent illegal mergers, not to make the world a better place.” Just yesterday, Democratic lawmakers were joined by environmental groups such as Food and Water Watch and the Sierra Club in broadening their demand, asking the FTC “consider all harms that past and future mergers present to American consumers.”
 
Environmental activist organizations have also taken aim at Exxon’s merger as a part of a broader campaign targeting the oil and gas industry that has ramped up as the election approaches. The Natural Resources Defense Council (NRDC) claimed “multibillion-dollar mergers [including Exxon’s] are pointing to a consolidation of resources and power that demands our scrutiny.” NRDC also claimed Exxon is expanding its fossil fuel operations “rather than using their billions in profits to grow their renewable energy portfolios.” Climate Power’s Alex Witt similarly claimed Exxon’s merger runs afoul of its emissions reduction goals and doubles “down on their commitment to oil and gas and putting profits over people.” According to Witt, “The FTC is right to investigate Exxon’s acquisition of Pioneer, which could raise prices at the pump and is aimed at keeping the U.S. reliant on fossil fuels.” The Sierra Club used the merger to criticize U.S. banks, which have become a target for climate activist groups in recent months and years, arguing, “It is pure hypocrisy to say you want to reduce emissions from oil and gas and then act as financial adviser to Exxon to grow its oil and gas business.”
 
Completing M&A in a heavily regulated and scrutinized industry like energy in today’s challenging political environment requires a smart public affairs strategy based on deeply informed research to ensure you can overcome objections in the court of public opinion. This means identifying stakeholders and coalitions most likely to oppose the merger, understanding their motivations, and then leveraging that information to outline their likely strategies and tactics. By assessing the opponents, companies can separate stakeholders who have fair or reasonable concerns from ideologically motivated opponents who oppose corporate consolidation or the industry more generally. It also means assessing who might be a reliable ally as the merger scrutiny heats up. Securing an information advantage by digging deeper into the network of opponents and potential friends ensures a company can build a plan to ensure the merger is a boom rather than a bust.
 

Trends in Energy is your weekly look at key trends affecting the energy industry, brought to you by the competitive intelligence experts at Delve. As the political and regulatory landscape continues to shift, reach out to learn how our insights can help you navigate these challenges.