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Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
Bharma Brazil M&A
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Bharma Brazil M&A

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  • 1. BRAZILLIAN BEER MERGER NEGOTIATIONS: COMPANHIA CERVEJARIA BRAHMA Presented By: Apoorva Dixit Carolin Emrich Kornkamon Leelakraisorn Saurav Ganguli Watchara Kaewkaw
  • 2.
  • 3. AGENDA
    • Brahma and Antarctica
    • Brazilian's Beer Industry
    • Analysis of the Merger
      • Synergies and SWOT analysis
      • Negotiations
      • Conclusion & Takeaways
  • 4. COMPANHIA CERVEJARIA BRAHMA
    • Founded in 1988, Brahma had turned into the most efficient and leading brewer in Brazil as well as number five worldwide
    • An expansion by foreign acquisitions and investments established the firm also in Argentina and Venezuela
    • A number of strategic alliances and joint ventures allowed Brahma to also serve the rest of Latin America
    • In 1998, beer accounted for 78.5 % of total sales and 94.7 % of its EBITDA
    • Since 1994, Brahma´s aims to increase shareholder value and market share were pursued by acquisitions, investments, and alliances
    • Despite the outperformance of its peers, the soft-drink divisions and acquisitions were hardly profitable
    • Relatively low operating costs and financial leverage as well as strong channels of distribution promised a strong position with regard to its competitors
    Key facts Past Developments & Future Expectations
  • 5. ANTARCTICA PAULISTA, S.A.
    • Second-largest company in the Brazilian beer market and also in the sof-drink industry
    • At the end of 1998, assets equaled R$ 3.4 billion and Sales amounted to R$ 1.38 billion, while 73 % were made up by beer
    • Cerveja Antarctice, the flagship brand, was Brazil´s second-ranked beer brand and number four worldwide
    • Product portfolio comprises of 18 beer brands, 12 soft drink brands and 30 other beverage products
    • From 1996 to 1998, net sales in all categories declined and its beer market share dropped by 18 % due to insufficient customer focus, failures in the distribution network, and rising competition
    • Newly established beer brand, Bavaria, gained 5-6 % market share since 1996 by targeting a younger customer segment
    • Due to a major expansion of production capacity in 1996, overcapacity of 41 % in beer and 47 in soft drinks prevailed in 1999
    Key facts Past Developments & Future Expectations
  • 6. THE TWO COMPANIES
    • Antarctica is constantly losing the market share over the period of time
    • Financial Comparative Performance as of 1999
      Antarctica Brahma Revenue $1,406.5 $3,247.0 Net Income $(578.8) $212.7 Total Assets $3,567.6 $5,233.8 Stock - Price Information $39.6 $637.5
  • 7. BRAZILIAN’S BEER INDUSTRY
    • In 1998, it was the world’s forth-largest beer market
    • Three firms accounted for 90 % of the market
    • Beer-sales volume grew at a compound rate of 11.3 % from 1993-1998, but in the past three years sales growth had been zero
    • Channels of Distribution was the key success
    • Restructuring of Brazil’s beer industry after the R$ devaluation
  • 8. SWOT ANALYSIS
    • Strengths
    • Stronger competitive position
    • Expansion into related
    • product lines
    • Revenue synergies of
    • R$121mn per year because of
    • reduced price competition
    • Cost saving synergies of R$
    • 45 mn per year in production,
    • distribution and
    • administration
    S T O W
    • Weaknesses
    • Existing surplus capacity for both partners
    • Considerable financing needs of Antarctica
    • Eroding market share of Antarctica, negative perception about the Brand
    • Opportunities
    • 70% market share – merged entity holds a higher share in the Brazilian beer market
    • Greater bargaining power with retailers and distributors
    • Pricing Power in the market
    • Threats
    • Unknown economic outlook
    • Possible Entry of foreign firms
    • Cannibalization of products
    • Antitrust Laws
    • Labor Unions, competing producers & municipal governments. imposing conditions
    • Antarctica’s labor cost per hectoliter was 20% higher than that of Brahma
    S W O T
  • 9. NEGOTIATION STRATEGIES
  • 10. NEGOTIATION STRATEGIES
  • 11. CONCLUSION & TAKEAWAYS
    • To assure a pole position in the future, Brahma should merge with Antarctica
    • The merger would entail a good business fit and remarkable synergies
    • The timing of the merger is appropriate
    • Success of the merger mainly depends on the key stakeholders´ satisfaction with the negotiations
    • Telles´ negotiation team should find the right balance in not alienating Antarctica and giving too much away
  • 12. THANK YOU & CHEERS!

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