The complete paper analyzes the 2021 merger of Cabot Oil and Gas with Cimarex Energy to understand the distinct advantages gained from applying a probabilistic approach to the financial analysis of mergers and acquisitions (M&A) and divestitures. Traditional deterministic valuation and transaction analyses, which rely on a static set of assumptions, are compared with a probabilistic approach based on Monte Carlo simulation using a readily available Excel add‑in.
Introduction
On 24 May 2021, Cabot Oil and Gas Corporation and Cimarex Energy Company announced a $17 billion, all-stock merger of equals whereby Cabot would issue 4.0146 of its own shares for each Cimarex share. Per the joint proxy statement/prospectus filed with the Securities and Exchange Commission on 23 August 2021, the exchange ratio was deemed “fair, from a financial point of view” by Cabot’s financial adviser, J.P. Morgan Securities (JPM), and Cimarex’s financial adviser, Tudor, Pickering, Holt and Co. (TPH), based on their respective deterministic analyses.
