The document discusses the merger between Anheuser Busch and InBev in 2008. It provides background on the two companies pre-merger, including financials which showed InBev had better margins. An integration plan aimed to realize $1.5 billion in synergies through cost reductions, distribution networks, and best practices. Post-merger financials showed improved profit margins and EPS. The combined company AB-InBev achieved merger goals through synergies and managing cultural transitions during integration.

1. INTEGRATION
M & A – TEAM 4
AARON TEO
MALINDILE NKAMBULE
MAX OCAMPO
SATHYA NARAYANAN SUBBARAJ
VIPUL SONAVANE

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.