Subject category:
Strategy and General Management
Published by:
Harvard Business Publishing
Version: 24 February 1999
Length: 17 pages
Data source: Field research
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Abstract
In order to secure demand for its heavy oil, in 1986 the Venezuelan oil company buys 50% of the US refining and retail company Citgo. In 1990, PDVSA buys the remaining 50% ownership of Citgo. The case describes the challenges faced by PDVSA & Citgo managements as they try to make their relationship work effectively. Makes the point that for synergies to be realized from any business combination, whether partial or complete, the parent (acquiring) corporation and the subsidiary (acquired) business must: 1) strike a balance between control and autonomy and 2) actively exchange knowledge and skills. Illustrates the management challenge of implementing a governance system oriented towards value maximization for the firm rather than for satisfying the interests of a combined subset.
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Abstract
In order to secure demand for its heavy oil, in 1986 the Venezuelan oil company buys 50% of the US refining and retail company Citgo. In 1990, PDVSA buys the remaining 50% ownership of Citgo. The case describes the challenges faced by PDVSA & Citgo managements as they try to make their relationship work effectively. Makes the point that for synergies to be realized from any business combination, whether partial or complete, the parent (acquiring) corporation and the subsidiary (acquired) business must: 1) strike a balance between control and autonomy and 2) actively exchange knowledge and skills. Illustrates the management challenge of implementing a governance system oriented towards value maximization for the firm rather than for satisfying the interests of a combined subset.