Halliburton watching Baker Hughes merge with General Electric's oil and gas division is a bit like witnessing your first true love get married to a better-looking guy from a rich family, whom you've never liked.
Adding insult to injury, Baker Hughes took Big Red's $3.5 billion engagement ring into the new relationship with GE.
Halliburton's attempt to buy Baker Hughes was never meant to be, but that doesn't soften the blow.
The combined GE-Baker Hughes company will surpass Halliburton to become the world's second-largest oil field services provider in terms of revenue, which was Halliburton CEO Dave Lesar's dream.
In many ways, Lesar laid all the groundwork for the GE-Baker Hughes deal. Lesar's proposal forced Baker Hughes CEO Martin Craighead to go through the company with a fine-tooth comb, removing the waste, identifying opportunities and creating a data room filled with everything a potential suitor could want for due diligence.
What Lesar and Craighead failed to adequately address, though, was that Halliburton and Baker Hughes were basically mirror images of one another. They operated in the same places and offered many of the same services.
Craighead recognized the risk, which is why he negotiated a $3.5 billion breakup fee from Halliburton in case regulators blocked the deal. And that's exactly what happened, giving Baker Hughes an impressive dowry.
Credit Jeff Immelt, GE's chief executive, with recognizing a chance to kill two birds with one stone by buying Baker Hughes. GE's oil and gas division supplies above-ground equipment involved in moving petroleum from the wellhead to the refinery.
GE needed a way to get into the more profitable business of drilling and fracking, which are Baker's specialties. That's why the GE-Baker Hughes deal doesn't create significant antitrust issues.
Secondly, Immelt recognized the opportunity to spin off his oil and gas division into a new Baker Hughes, which will become a publicly traded company using the Baker Hughes name. Activist shareholders have been pressuring Immelt to spin off divisions to generate value for shareholders.
GE will own almost two-thirds of the new Baker Hughes, with the rest of the company belonging to current Baker Hughes shareholders. Houston-based energy investment banker Tudor, Pickering, Holt & Co. predicts that the new company will add 4 cents a share to GE's earnings in 2018 and 8 cents a share by 2020.
Halliburton, meanwhile, is watching its ranking in the oil and gas business drop. Schlumberger, with headquarters in The Hague and Houston, is the undisputed No. 1 in oil field services with $35 billion in 2015 revenue. Halliburton has historically been a distant No. 2, with $23 billion in 2015 revenue.
The new Baker Hughes is expected to generate $32 billion in revenue, and Halliburton will face a challenge for third place from the proposed merger of FMC Techologies and Technip, which would create an offshore oil field services company with $20 billion in revenue.
The new Baker Hughes will fiercely compete with Halliburton. GE's global reach in all sectors of the energy business will give Baker Hughes a marketing and sales advantage when higher oil and natural gas prices spur more drilling, probably in 2019. Baker Hughes also will have access to what Immelt dubbed "The GE Store," an initiative that encourages different divisions to shop for new technology from other divisions.
Baker Hughes, for example, can access the latest big data technology being developed by GE's Industrial Internet division. Because GE is diversified across many industries, the parent company also can protect Baker Hughes from swings in commodity prices.
This will force Lesar to spend more on research and development to keep up with Halliburton's larger, most sophisticated competitors. And because Big Red's revenue is almost completely dependent on oil prices, it's tough for Halliburton to spend on R&D during a downswing.
Halliburton also will need to protect its dominant share of the North American fracturing business. Baker is a major player, which is why the Justice Department opposed the deal.
If there is one bright spot for Halliburton, it could be the one business segment in which GE and Baker Hughes overlap: artificial lift.
When Lesar pitched his plan to buy Baker Hughes, he said he really wanted Baker Hughes' skill at injecting different materials into wells to push out oil that was not rising on its own. Schlumberger, GE and Baker Hughes are the market leaders in artificial lift, and regulators may want GE or Baker to sell their artificial lift businesses to clear the deal.
Halliburton would be the ideal buyer, said Byron Pope, an energy analyst with Tudor, Pickering, Holt & Co.
That's not much of a party favor, particularly after basically financing your ex-girlfriend's wedding. But then again, all's fair in love and business