1. Son Trinh
November 14, 2011
MGMT 498
David Emerson (VP Corp Development) of Baker Hughes Presentation
In the wake of the current economic crisis and the simple fact that history likes to repeat
itself, there is uncertainty in every situation especially for businesses that hope to emerge
during difficult economic times. Mergers and acquisitions are important strategic options that
create opportunity for firms looking to diversify and vertically integrate. More and more firms
are looking to mergers and acquisitions to capture and create value in their companies.
Defining and selecting organizational structure is more of an art and depends on the type of
business, the people involved, and the products or services that are produced within that
business. The past is a guide for future and uncertain times often present great opportunities
for innovation to help create and capture value for a business.
David Emerson, VP of Corp Development for Baker Hughes talked about a lot of really
important and relevant issues businesses in today’s economy face every day. There are a
number of different ways a company can gain a competitive advantage and sustain during hard
economic times. Economic recessions and inflation are constant reminders of how unstable
free markets can be in general and businesses which emerge from such difficult times by
utilizing their resources are performing strategically. Mergers and acquisitions create value and
help to capture value for the company. Growth markets are an important factor to act upon;
when business is good you have to go for it. Waiting can be catastrophic to small businesses
that do not have the luxury of waiting to see what is going to happen. David Emerson also

2. talked about looking for efficiencies within a company as well as disruptions such as technology
and supply chain. These components all contribute to whether or not a business will can
sustain and remain profitable. Specialization is another great way for companies to obtain and
maintain a competitive edge. Companies that just focus on one particular service or product
and can do it the best are going to have a healthy advantage over their competitors.
Emerson also touched upon large cap companies vs. small cap companies. Small cap
companies are outperforming large cap companies but they rely on the large cap companies for
their growth and development. Large caps growth per year was at 10% while small cap was at
15%. Large caps maintained a return on equity at 14% while small caps were at 22%.
Shareholder returns for large caps are at 7% and small caps are at 20%. Although small cap
companies are developing at a better rate than large cap companies, they do not have the
ability to international. Small cap companies can go bankrupt if they try to go global, while
large cap companies have the infrastructure to go international. This is the driver for mergers
and acquisitions in the oil and gas business. Execution is everything and is the key in an
acquisition. The trick is not to pay too much, avoid unnecessary bidding wars caused by
managerial hubris and successful integration is the solution.
Emerson states that is it not uncommon to have a 500 million dollar engineering budget
which allows companies to make innovation instead of buying them. If a company does buy
innovation they can generate leverage with internal development. This drives both target
structure and targets. Smart thinking is when good planning meets luck to transform the

3. company in a large way. David also talked about how history is a guide to the future. It is
essential to look at what has happened in the past to plan more effectively for the future. A
company’s internal structure raises many questions. How do you structure your company, a
divisional structure or regional? Businesses are moving away from geographic structure to a
divisional structure. Should we be innovative or focused? In order to be successful you have to
do both. David says it does not matter how you structure your company because it is going to
change throughout the years. A company structure is a function of the market, a function of
the customer, and their product line. Creating company structure is more of an art rather than
a science.
Dealing with people and relationships can create a gridlock matrix where you are not
going to be able to please everyone. Machete management sent qualified leaders to small
companies which eventually became competitors to the companies they were cut from. In the
wake of economic turbulence the question is asked, how can such smart people make such bad
decisions? The answer is that it comes down to politics, people, culture, and interpersonal
relationships. Companies are like people, they are not perfect and this creates opportunity for
change an innovation. Emerson states that the Federal Reserve says we are in slow and long
recovery. This also creates opportunity to figure out where people can find value or create
value.
There is no certainty in any business. At the end of the day there is simply no substitute
for hard work. A person’s ability and drive may begin high and then go down over time. The key

4. is to find out where the two intersect and figure out where they can create value. The idea is to
find your sweet spot, and figure out who is willing to loan you money? Who is going to have
faith in you? In order to be successful in uneasy times you just need to figure out where it is
that you can excel and contribute as an individual and as a business.
Questions for David Emerson:
Website statement:
Baker Hughes is a top-tier oilfield service company with a century-long track record, Baker Hughes
delivers solutions that help oil and gas operators make the most of their reservoirs. Our solutions are
designed to lower costs, reduce risk or improve productivity for the global oil and gas industry.
Question:
Oil and gas are non-renewable energy resources and will eventually become depleted. What plans does
Baker Hughes have for the future outside of the oil and gas business? Does the company plan to expand
into the renewable energy business, merge or acquire smaller companies who are already in the
renewable energy business and help develop them internally?
Website statement:
Our history of technology innovation is a cornerstone of our success. Local teams are supported by
global centers of excellence where scientists push the boundaries of value-adding technology to find
solutions for progressively more complex technical challenges. At Baker Hughes, we are looking forward
to the next 100 years of working side by side with our customers to continue expanding the limits of oil,
gas and alternative energy drilling, completion and production through innovation problem solving.
Question:
With rapidly growing and emerging markets of China, Brazil, Russia, and India, what is Baker Hughes’
stance on the best way to supply enough energy for these up and coming economies that will easily
dwarf the consumption patterns of the United States?