Abstract: Between 2011 and 2022, greater than 50% of global E&P merger and acquisition (M&A) transactions destroyed shareholder value with only 25% generating approximately 60% of total excess returns, per McKinsey & Co.  Therefore, upgrading the M&A decision-making process is particularly important given its critical role in building companies.  This presentation analyzes the 2021 merger of Cabot Oil & Gas with Cimarex Energy to understand the many advantages gained from applying a probabilistic approach to the financial analysis of M&A.  Traditional deterministic valuation and transaction analyses are compared to a probabilistic approach based on Monte Carlo simulation using a readily available Excel add-in.  This presentation will highlight how a dynamic approach to the M&A process: (i) is straightforward to implement; (ii) facilitates a greater use of real-world data; (iii) generates outcome probabilities for key transaction metrics otherwise unavailable; and (iv) provides unique risk insights into those transaction metrics, all of which represent a significant improvement to management’s ability to evaluate specific transactions and increase their likelihood of success. 

Bio: Mr. Lachlan Hughson, the founder of  4-D Resources Advisory LLC, works directly with Boards, executives and investors to help them build more successful companies through making better strategic and financial decisions using dynamic financial modeling.  He has over 30 years of experience across the broad natural resources industry in corporate finance, M&A, capital markets, strategic advisory and risk analysis.  His background includes increasingly senior investment banking roles at Lehman Brothers, Bear Stearns, Standard Bank and Macquarie Capital, and as the Finance Director at Antero Resources.  His education includes an MSc from Imperial College London and an MBA from the Kellogg School of Management, Northwestern University.