“What energy companies really mean by ‘shrink to grow'”
Companies laying people off and shedding assets sometimes say they are “shrinking to grow.”
It’s not a strategy that always works. In fact, sometimes this is more of a story companies tell to justify what is really just shrinkage, with hopes for growth in the future. It’s been on the mind of Andy Derman, a partner with Thompson & Knight LLP, who worked during the 1990s for a large independent oil company that struggled, downsized, and was eventually bought out.
“‘Shrink to grow’ means you just get smaller, but you’re still weak,” Derman says. “They shrink to get acquired, they shrink to go bankrupt. Really what you’re doing is trying to survive.” Derman was at a conference in the Woodlands earlier this month put on by the Association of International Petroleum Negotiators, and asked a panel of industry analysts whether they’d seen an example of the strategy resulting in a full recovery.