Ab inbev m&a

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Study about Ab and Inbev merger.

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Ab inbev m&a

  1. 1. INTEGRATION M & A – TEAM 4 AARON TEO MALINDILE NKAMBULE MAX OCAMPO SATHYA NARAYANAN SUBBARAJ VIPUL SONAVANE
  2. 2. History Anheuser Busch “Brewery created in the mid 1800’s in St. Louis Missouri, US.” InBev 2007 2007 189 Production (millions of hl) 49% US Market Share 52.3 Stock Price ($) 271 11.5% 78.1 32,191 Market Capitalization (USD millions) 48,028 30,849 Employees 89,000 12 Brands US Budweiser Bud Light Michelob Busch Natural AB Intl Corona Budweiser Budlight Harbin Estrella Damm “Company created in 2004 from the merger of Belgian Interbrew (1366) and Brazilian AmBev (1999)” Number of countries w/ operations Equity Investments Mexico: 50.2% Grupo Modelo China: Tsingtao 30 2007 Volumes Brands 5th world vol. sales China, China U.k Distribution Partnerships India: Crown Beers Panamá: Cervecería Baurú Colombia: Heineken Intl. Canadá: Labatt Brewing Co. UK: Grupo Damm Other Key Markets Russia, Argentina 120+ countries Brahma Brazil, Russia France, Belgium, US, Canada Hoegaarden Local Leaders 80+ countries Beck's Multi country Stella Artois Leffe 80+ countries Global US, Russia, Belgium Staropramen Prague, Ukraine, Russia, UK Jupiler Belgium, Netherlands Cass Korea Quilmes Argentina Siberian Crown Russia Skol Brazil Alexander Keiths Canada Sedrin China 2% 14% 5% 37% 18% 13% 11% North América Latin América North Latin América South Western Europe Central & Eastern Europe Asia Pacific Global Export & Holding Companies
  3. 3. History Global Beer Market Share Brewery Country Billion hl. SABMiller UK 284 12.45% InBev Belgium 271 11.88% Anheuser-Busch US 189 8.29% Heineken Netherlands 150 6.58% Carlsberg Denmark 130 5.70% Anheuser Busch InBev Creating the global leader in beer (July 14, 2008) Market Share
  4. 4. Merger Strategy In July 2008, Inbev offered Anheuser Busch shareholders USD 70 per share for an aggregate equity value of USD 52 billion for the acquisition What were the challenges faced by the company? InBev Ongoing consolidation in the industry e.g. SABMiller became the largest brewer after Grolsch acquisition  Low market share in growth areas such as China  Rising commodity cost e.g. barley, hops Anheuser Busch  Dependency in US domestic market (>70% of sales)  Changing consumer behavior e.g. wines, spirits  Stock price stagnant  Low liquidity ratios
  5. 5. Merger Strategy Reciprocal synergies through application of best practices were expected from the merger Market Share Geographic Diversification Increased Revenue Cost Reduction Distribution Network Buying Power Leading brand in the five largest beer markets in the world Minimal geographic overlap between the two companies Cross-selling e.g. Budweiser (US #1) export to global markets InBev’s financial controls to improve A-B’s margins R&D and logistics cost reduction InBev to access A-B’s US domestic distribution network Negotiating better long term pricing agreements with suppliers
  6. 6. Merger Strategy Merger expected to realize USD 1.5 billion in synergy over the next 3 years Other: expected realisable cost synergies in China, procurement efficiencies, elimination of overlapping corporate overheads and the sharing of cost management best practices InBev Analyst Meeting (October 2008)
  7. 7. Pre-Merger: Key Financials InBev had better margins and better overall financial performance Pre-Merger Key Financials for FY 2007 (In million €) Anheuser Busch * InBev Revenue 12,179 14,430 Cost of Sales (7,910) (5,936) Gross Profit 4,270 8,494 Gross Profit Margin 35% 59% EBIT 2,112 3,920 EBIT Margin 17% 27% Basic EPS (in € ) 2.07 3.60 Diluted EPS (in € ) 2.04 3.59 Cash 207 1,324 Current Assets 1,478 5,539 Total Assets 12,522 28,699 Total Liabilities 10,221 13,789 Shareholder Equity 2,300 13,625
  8. 8. Pre-Merger Integration Plan Integration plan : Communication plan: Employee retention:  Agreement for continuation of job  USA BU head from A-B  Motivate key executives Internal Communication:  Web conferencing from both the company executives  Establish an integration website  Positioning plan of A-B Integration Team:  Mix leadership  Minimize accountable people  Appoint new people for M & A integration Customers:  Communicate transparently to key customers, retailers and ontrade companies.  Explain the value creation to customers  Create more engagement plans with customers  Strengthen relationship among Suppliers and distributors HR:  Eliminate overlaps in all departments Media and Others:  Communicate future plans  Common presentation; Open, co-operative answers to questions  Bring all people on equal levels  Define exit strategy for employees not ready to get  Shareholders: make all the information available immediately, Inform about next steps adjusted  Government: Ask and file all necessary documents for acquisition  Finance: Consolidate finance staff and appoint lead within A-B for Zero Based Budgeting initiative
  9. 9. Pre-Merger Integration Plan Others challenges:      System: Get everyone onto InBev's System and hardware as soon as possible Facilities and manufacturing: Close and consolidate A-B and/or InBev offices wherever possible Marketing: Meet for cross selling opportunities and to grow the brand Value Set clear business and financial targets Sales: Identify the opportunities and leverage distribution channel Issues: Cultural Issues:  Different countries : Belgium and USA  Integration of cost and financial discipline to A-B's environment Regulatory issues:  Approval by the Federal Trade Commission in the United States and the European Commission for the European Union
  10. 10. Post-Merger: Key Financials Combined company achieved lower cost of sales and improved profit margins Post-Merger Key Financials (In million $) AB-InBev FY 2008 AB-InBev FY 2009 AB-InBev FY 2010 AB-InBev FY 2011 AB-InBev FY 2012 Revenue 39,158 36,758 36,297 39,046 39,758 Cost of Sales (19,443) (17,198) (16,151) (16,634) (16,447) Gross Profit 19,715 19,560 20,146 22,412 23,311 Gross Profit Margin 50.35% 53.21% 55.50% 57.40% 58.63% 9,123 10,248 11,165 12,607 12,765 23.30% 27.88% 30.76% 32.29% 32.11% Basic EPS (in € ) 2.91 2.53 3.67 4.53 Diluted EPS (in € ) 2.90 2.50 3.63 4.45 Cash 3,689 4,511 5,320 7,051 Current Assets 10,853 12,597 12,323 20,630 Total Assets 112,525 114,342 112,427 122,621 Total Liabilities 79,354 75,543 71,383 77,180 Shareholder Equity 30,318 35,259 37,492 41,142 EBIT EBIT Margin
  11. 11. Post Integration Financial Outlook of the ABInBev Earnings post integration (2008 - 2011) 40.0% 35 35.0% 30 30.0% 25 25.0% 20 20.0% 15 15.0% 10 10.0% 5.0% 0.0% 2008 EPS & Share Price (€) 2009 Revenue (USD) 40 4 30 3 20 2 1 10 0 0 2009 Basic EPS 2010 Share Price 2011 Share Price 50 5 Basic EPS EBITDA(USD) 2011 EBITDA Margin Expenses as a percentage of revenue 6 2008 2010 EBITDA Margin (%) 40 0 Billions 45.0% 5 Revenue / EBITDA ($) 45 16% 14% 12% 10% 8% 6% 4% 2% 0% 14% 14% 13% 8% 6% 9% 6% 2008 Distribution Expenses 7% 6% 2009 13% 8% 2010 Sales & Marketing Expenses 5% 2011 Administrative Expenses
  12. 12. Post Integration 1.64 1 Total Volume of Production (m HL) 122 120 118 116 114 112 110 140 120 100 80 128.4 104.4 40 20 4 2007 Inbev 2009 2010 2009 US - Volume of Production(m HL) 0 Employees 2008 2008 60 Thousands 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 No. of Employees Capital Expenditures(€) 2008 AB ABInbev China - Volume of Production(m HL) Total Volume of Production (m HL) Capital Expenditures) Billions Synergies were significant post integration 70 60 50 28.2 40 63.6 30 20 33.4 10 0 2007 Inbev AB ABInbev 2008
  13. 13. Post-Integration Non-Financial:  Increased geographical presence as there was minimal overlap in the business  Sharing of best practices across the organization in terms Distribution, Marketing, Innovation and Corporate Social Responsibility of Sales &  Global production and distribution network which enabled cost reduction and increased efficiency  Busch was on board till 2011 as per the integration plan  It was a cross culture merger, but less interfere in each other’s business processes and minimal overlapping of the geographical area worked in favor  Increased cross selling opportunities by tapping on the geographic reach of the two companies  Divestiture of businesses (eg. Oriental Brewery to KKR ) as part of its on-going de-leveraging program to unlock shareholder value
  14. 14. Conclusion  AB-InBev, having achieved the synergies in cost reduction and leveraging of distribution channels achieved the merger goals.  The combined company was able to successfully manage the cultural transition with its execution of the integration plan.  On the whole, the merger proved to be successful.

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