(74a) Synergy in Mergers of Petrochemical Companies within a Complex Considering Purchasing and Selling Advantage with Process Integration

Mergers and Acquisitions, M&A, have been active in the petrochemical industry. However, the synergy created by the merger of petrochemical companies has rarely been studied, although it is the primary goal of a merger. This study deals with the merger of petrochemical companies located within one complex. Synergy considerations resulting from process network integration with fixed cost reduction and market power increase in upstream market (i.e., resource purchasing advantage) and downstream market (i.e., product selling advantage) are included. A novel mathematical model is formulated that represents the operation of a process network aiming at increasing the profitability of merged companies. The resource purchasing advantage and product selling advantage options are considered by means of various scenarios. The proposed model is applied to Korean Naphtha Cracking Center, NCC, companies in one complex. The results, presented in three case studies, demonstrate that a merger creates synergy primarily from the purchasing advantage and selling advantage options, while the process network integration which simply collects various processes can create little synergy.

Keywords: Merger and acquisition; Synergy; Market power; Process network; Naphtha cracking center; Petrochemical company; Petrochemical industry