MegaBrew: M&A value or flat beer?


The $104B merger between AB InBev and SABMiller makes a great holiday addition to your classroom.ABInbevTree While it is largely a corporate strategy question, I used this discussion to kick off my course and I plan to come back to it as we hit various topics. Here is a packet of news articles that I used as the basis of the case. I also had students complete a brief online poll in advance of the class. This allowed me to start by summarizing their positions and to call on people who I knew had relatively unusual opinions. I used the case to show them how to draw a decision tree (click the image to enlarge) reflecting the uncertainty associated with the acquisition. Of course, it also frames topics throughout the course. Here are a few examples:

  • Internal capabilities. AB InBev’s capability to conduct acquisitions and to cut costs.
  • External analysis. Market structure for beer in different countries (namely Africa and China which drive this deal). Also, we compared the market structure for micro- and macro-brews. Of course, these mega-brews act to control distribution channels so barriers to entry are a key part of the game.
  • Competitive dynamics. Of course this is a game among the rivals but it also includes adjacent industries (like spirits).
  • Corporate. What are the logics for value creation? For example, to what extent does scale lower manufacturing costs as opposed to purchasing power or other mechanisms. At what point is a larger scale no longer an advantage?
  • Strategic factor markets: The M&A context makes it clear that most of the synergies go to the target (especially at the 50% bid premium).
  • Global. As indicated above, this is mostly about entry into new markets (China and Africa, among others).

Contributed by Russ Coff

One thought on “MegaBrew: M&A value or flat beer?

  1. Pingback: Bring Me Your Confusions! | Carpenter Strategy Toolbox

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