BRAZILLIAN BEER MERGER NEGOTIATIONS: COMPANHIA CERVEJARIA BRAHMA Presented By: Apoorva Dixit Carolin Emrich Kornkamon Leel...
AGENDA <ul><li>Brahma and Antarctica </li></ul><ul><li>Brazilian's Beer Industry </li></ul><ul><li>Analysis of the Merger ...
COMPANHIA CERVEJARIA BRAHMA <ul><li>Founded in 1988, Brahma had turned into the most efficient and leading brewer in Brazi...
ANTARCTICA PAULISTA, S.A. <ul><li>Second-largest company in the Brazilian beer market and also in the sof-drink industry <...
THE TWO COMPANIES <ul><li>Antarctica is constantly losing the market share over the period of time </li></ul><ul><li>Finan...
BRAZILIAN’S BEER INDUSTRY <ul><li>In 1998, it was the world’s forth-largest beer market </li></ul><ul><li>Three firms acco...
SWOT ANALYSIS <ul><li>Strengths </li></ul><ul><li>Stronger competitive position </li></ul><ul><li>Expansion into related  ...
NEGOTIATION STRATEGIES
NEGOTIATION STRATEGIES
CONCLUSION & TAKEAWAYS <ul><li>To assure a pole position in the future, Brahma should merge with Antarctica </li></ul><ul>...
THANK YOU & CHEERS!
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Bharma Brazil M&A

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Bharma Brazil M&A

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