by Stephen B.

Goldberg

TEXOIL
General Information and Information for Texoil Rrepresentative

Texoil, 1 a large petroleum refining company, owns some service stations outright. For the most part,
however, it contracts with individual service station owners to provide them with all their requirements
of gasoline, oil, tires, batteries and accessories. One of the independent service station owners, who has
been under contract with Texoil for 12 years, has recently put the station up for sale. In addition to
notifying Texoil that the station was for sale, the owners put ads in the local newspapers, as well as in a
national professional journal of service station owners. The ads said that they were selling for family
reasons.

The service station is located on one of the main routes leading to the Port of Los Angeles. This port area
is growing because of the consolidation that is occurring among west coast ports. The port is now
operating 24 hours per day, and all expectations are that it will continue to do so. There are several small
shopping centers in this area and numerous warehouses. There are, however, only two other service
stations in the vicinity and neither is run by an owner-operator.

The station owners are a husband and wife, both of whom work at the station. They keep the station open
6 a.m. to 10 p.m., 6 days a week. The station is closed on Sundays. Their annual income has been
approximately $75,000 (before taxes).

The service station owner and a Texoil representative are scheduled to meet to discuss Texoil’s possible
purchase of the service station.
Role of Texoil Representative

Texoil has recently begun a five year plan of increasing its service station ownership, and it hopes to add
a minimum of 100 stations during those five years. Thus, it is very interested in purchasing this station. It
is a shame that these owner-operators seem to be leaving the service station business, as they have been
an excellent management team and Texoil needs good managers as it expands. Nevertheless, their desire
to sell presents Texoil with an opportunity that it wants to take advantage of.

The Port of Los Angeles area has excellent prospects for growth. This station is well situated, and is faced
with comparatively little competition compared to other stations the company services and operates.
Texoil is convinced that this is an excellent opportunity for acquisition.

There are no other stations in the area for sale. The cost of purchasing land and building a similar service
station in this area would exceed $675,000. However, a new station would have up-to-date equipment to
meet all environmental regulations efficiently, and with the addition of a mini mart, a new station should
be capable of generating greater profits than the current station, particularly if Texoil keeps it open 24/7.

1 This exercise has been adapted and translated by Professor Stephen B. Goldberg from an exercise created by Henri LeCloarec

and copyrighted by Mobil France.

_______________________________________________________________________________________________
© 1996-2017 Stephen B. Goldberg. Distributed by Negotiation and Team Resources (NTR). To request permission to reproduce
contact negotiationandteamresources.com
 Texoil Rep - 2

There is space on the property to add a mini mart, but to do so would require that Texoil make an
additional capital investment beyond the cost of acquiring the station of approximately $100,000. In
addition, Texoil would want to update the current pumps and the mechanic's area. For these reasons,
Texoil has not authorized you to pay more than $500,000 for this station.

As Vice President for Operations, you are not generally the one negotiating acquisitions for Texoil. Your
regular job is to oversee the management of the stations that Texoil owns outright. However, the manager
who would normally negotiate this transaction will be unavailable for a few months due to health, and as
you were traveling to L.A. anyway, you volunteered to meet with the station owners.

_______________________________________________________________________________________________
© 1996-2017 Stephen B. Goldberg. Distributed by Negotiation and Team Resources (NTR). To request permission to reproduce
contact negotiationandteamresources.com