The brewing industry has enjoyed high margins and steady growth for decades. The acquisition of Anheuser-Busch (hereafter to be referred as “AB”) by InBev was regarded as an opportunity and a challenge for the executives and shareholders of both companies. Our report would examine the strategic rationale of the merge and qualify and quantify the synergy effects from revenue and cost. Also, we provide suggestions about culture integration for the newly merged firm. Finally, though the premium overweighs the synergy effects, we believe the competitive advantage of combined firm would benefit its shareholder in the long run. STRATEGIC RATIONALE
The value creation by merger of InBev and Anheuser-Busch fits well the synergy analysis framework. First, from the Benefit-Cost analysis, the synergy comes from the increase in synergy and saving on overlapped cost. From revenue increase perspective, we can expect InBev and Anheuser-Busch could cross sell each product through each channel. Apart from that, for those regions two companies have cost overlapped, two companies could save manufacturing and distribution cost. Second, the geographic dispersion helps the merger company become the largest bear company in the world. They diversify business risk and capture the different growth opportunity of both developing countries and developed countries. Third, the merger company could also benefit from economies of scale. The economies of scale come from manufacturing on cost side and also on decision side which means the company could make global decision. Finally, chances are that the culture of the new co- could incorporate the highlights from both company cultures. However, this can be only the drawback to this merger which leaves chance to culture conflict. For the rest part of the report, we will quantify this effect to calculate the synergy benefit. SYNERGY EFFECTS
As the two companies have different geographic and product coverage, we believe there is strong revenue synergy within this acquisition. First of all, through the integration, both companies will be able to access new markets with existing business models providing them with distribution channels, marketing, etc. It will help both of them save R&D expenses. It also allows them to broaden product lines and obtain new potential customer segments using each other’s existing customer base and brewery technology. Second, with each of their local knowledge on different markets (and market segments), both companies will be able to introduce new products more smoothly and accelerate their localization. For example, because consumers in emerging markets tend to trade up from discount segments to more expensive products, we predict more beer drinkers in those emerging markets of InBev will make the switch. AB’s experiences in the developed market, such as US, will help InBev in various aspects from product development to marketing, just as a transfer of first mover advantages. Third, in markets where both companies have a strong presence, the acquisition will give them more suppliers bargaining power, because they will have more product lines to offer at once, when negotiating with retailers. Those retailers could not afford to lose two big players like InBev and AB. It will also cost less for those retailers due to possibly combined shipment and sales transaction process. Forth, the acquisition not only provides these two companies with broader geographic coverage, but also the advantage of cross market retaliation over competitors. For instance, when a global competitor starts a price war in US with AB, AB now has the power to retaliate in Latin America using InBev. It gives them flexibility in their markets and helps them reduce external risk. Cost Synergies
We believe the merger create huge cost synergy due to the nature of operation. First, COGS and SG&A will reduce dramatically. The proposed process benchmarking, supply...