A Method To Organize and Manage the Evaluation of Petroleum Company Acquisition Candidates

Abstract

The program evaluation and review technique (PERT) can apply to merger/ acquisition evaluations. This paper describes how to manage an acquisition better by implementing an initial analysis process and adopting PERT procedures to minimize time, cost, and resources, while maximizing results procedures to minimize time, cost, and resources, while maximizing results of the work product. Introduction To undertake a comprehensive acquisition study, a task force of representatives from various functional areas of the acquiring company is assembled to conduct detailed analyses of the operations and business of the acquisition candidate. Requirements and time constraints of the analyses should be identified and grouped into a framework that allows the task force to undertake a systematic acquisition evaluation. This paper describes a simple process by which a firm can develop and implement analytical methods to perform merger and acquisition evaluations by adopting a general operational method that includes use of an activity and event diagram. This method has been proved both cost and time effective. An acquisition evaluation should begin with a general analysis based on readily available information that will allow a firm to determine the general nature and value of the potential acquisition. Should a decision be made to proceed, a formal evaluation begins to determine cost, information availability, and subsequent information requisitioning. During formal evaluation initiation, we recommend development of an activity and event diagram. The program evaluation and review technique (PERT) method of diagraming is used to control the capture of information and to outline requirements of activities and events needed to complete the evaluation of the acquisition candidate. PERT Fundamentals PERT Fundamentals PERT was developed jointly by the U.S. Navy and PERT was developed jointly by the U.S. Navy and the management consulting firm of Booz, Allen, and Hamilton. It first was applied to the construction of the Polaris missile submarine. Independently and at approximately the same time, an internal project of the DuPont Co. also instituted a similar network model to plan and control maintenance of chemical plants. The technique was credited with large plants. The technique was credited with large reductions in cost and time. The technique is developed around the two fundamental concepts of activities and events. An activity is the work necessary to complete a particular event, and an event is an accomplishment at a particular point in time. PERT is used when several events and activities are combined in a diagram.A major task in effectively managing an acquisition study is to allocate resources required to meet the objectives of an evaluation outlined and accepted by management. There is a great need for coordination to ensure that certain tasks are completed before other tasks. An approximate amount of time needed to complete the acquisition evaluation is required and should coincide with the evaluation deadline imposed by management.PERT readily lends itself to petroleum company acquisition evaluation. JPT P. 210