At a time when natural gas and oil prices were at record levels, oil and natural gas producer Andarko Petroleum announced the acquisition of two competitors, Kerr-McGee Corp. and Western Gas Resources, for $16.4 billion and $4.7 billion in cash, respectively. These purchase prices represented a substantial 40% premium for Kerr-McGee and a 49% premium for Western Gas. The acquired assets strongly complement Andarko’s existing operations, providing the scale and focus necessary to cut overlapping expenses and concentrate resources in adjacent properties. What do you believe were the primary forces driving Andarko’s acquisition? How will greater scale and focus help Andarko cut costs? Be specific. What are the key assumptions implicit in your answer to the first question?