The news that Shell is taking over BG did not come as a surprise to most people in the industry. Shell has been considering an acquisition of BG for so long that the people involved in the early phases retired a long time ago.
What kept Shell, and others, from making a bid all these years was BG Group’s impressively long track record of maintaining a PE multiple that was well above its industry peers. There was a great promise associated with BG, which gave it a value that was hard for more traditional operators to add to.
But, finally the circumstances aligned. Share price significantly down, BG coming with an LNG plant in Australia that Shell now doesn’t have to build for themselves, access to the rich basins off the Brazilian coast, a savvy trading business, a successful exploration portfolio and other valuable assets to add.
Shell’s challenge now is to see beyond the physical assets and capture that mysterious ingredient that had BG being able to maintain such a high PE over time. BG is a fundamentally different company to Shell. Shell puts great pride and trust in being well organised and figuring out the ‘right way to do things’, and adhering to this will produce the desired results – at least in Shell-theory. BG on the other hand, is a networked entity where communication lines go across the hierarchy, you go directly where you need to, you make up what is needed to deliver the result and speed is of the essence.
Shell's could become truly powerful if it had the courage to include some of BG’s traits as a part of the integration. Based on our experience, just considering and experimenting with some of BG's ways of doing business would provide valuable insights for Shell into how they could unleash their amazing talent pool, strike bolder deals, speed up decision making and fundamentally become a much nimbler player.
Bringing a piece of BG into Shell is no easy task. It can’t be done the ‘Shell way’ or the ‘BG way’, but needs very careful design and orchestration to be successful. This is a valuable opportunity to demonstrate the value of powerful cultural integration alongside a clear asset play.
Just considering and experimenting with some of BG's ways of doing business would provide valuable insights for Shell into how they could unleash their amazing talent pool, strike bolder deals, speed up decision making and fundamentally become a much nimbler player.