Top CEO Has These Tips On When To Hold 'Em And When To Fold 'Em
 Mike Wirth has worked at Chevron for 37 years, climbing the ranks from a design engineer to president of marketing for Chevron's Asia/Middle East/Africa division to CEO and chairman of the board. (REUTERS/Newscom)
6/21/2019
Chevron ( CVX) CEO Mike Wirth had a chance earlier this year to elevate the U.S. energy giant to what analysts called "ultramajor" status, a towering achievement after taking charge of the company just last year.
But he defied Wall Street expectations last month, when he walked away from a bid to acquire Anadarko Petroleum ( APC) after Occidental Petroleum ( OXY) put up a $38 billion counter-offer with financing from Warren Buffett's Berkshire Hathaway ( BRKB).
Chevron had offered $33 billion to obtain what management described as a "75-mile-wide corridor across the most attractive acreage in the Delaware basin" in the Permian Basin, the focal point of the U.S. shale boom.
In an interview with IBD, Wirth explained why he didn't want to get caught up in a bidding war with Occidental and when it's wise to abandon such endeavors.
When To Walk Away The decision to leave the negotiation table wasn't an easy one, but Wirth used his experience from working his way up the ranks at the oil major to know when it was time back down.
"When you're in the middle of a big negotiation and you've worked hard at it and a lot of people have worked hard at it, it's not easy to walk away," he told IBD. "Because you've got a lot of time, energy, and passion invested in that. And a lot of people do, too. If it's something you've taken that far you really believe in it."
Wirth has worked at Chevron for 37 years, climbing the ranks from a design engineer to president of marketing for Chevron's Asia/Middle East/Africa division to CEO and chairman of the board.
One of the things Wirth said he learned from his time at Chevron was to set boundaries before starting the negotiation process so emotions don't take over. In the case of Anadarko, the boundaries were focused on shareholders and creating value for them.
"Because in the heat of the moment, it's very difficult, and you get caught up in the competitive nature of it, the negotiation dynamics: 'We're there. We got it. Just take a little more of this, a little more of that,'" he said. "If you don't have boundary conditions you've established, you can just keep going and keep going."
Get Dispassionate Support Once he realized the deal would erode shareholder value and returns, Wirth said it was not as difficult for him to leave the negotiations as it was for those a bit closer to the deal, as they had worked on the opportunity for months.
Having "advisers that can look at things dispassionately," was crucial for his decision making. Wirth said that his board of directors was "a great source of advice."
"It was a great place to kick around ideas and when ultimately it became time to make the decision they were very supportive," he said of the board. "They were less vested in the emotions of the transaction than those of us who were closer to it."
Anadarko Deal Fallout Anadarko will pay Chevron a termination fee of $1 billion for choosing to go with Occidental's competing bid.
Meanwhile, Occidental CEO Vicki Hollub has faced criticism for going forward with the deal without shareholder approval. Activist investor Carl Icahn called the Anadarko deal "fundamentally misguided and hugely overpriced" and is suing Occidental.
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