BIG BEER: INBEV VS. ANHEUSER-BUSH Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

BIG BEER: INBEV VS. ANHEUSER-BUSH Case Solution

INTRODUCTION

This case about the potential acquisition of Anheuser-Bush by InBev, in this report the valuation of the offer received by InBev will be assessed along with fair value of Anheuser-Bush shares before and after adjusting synergies in the free cash flows of Anheuser-Bush shares. Furthermore the trends in the industry will also be analyzed in terms globalization and size of companies, the pros and cons of potential synergies.

WHAT ARE TRENDS IN THIS INDUSTRY IN TERMS OF CONSOLIDATION, GLOBALIZATION AND SIZE OF COMPANIES?

As it is evident form the case in great detail that industry is growing every year in terms of compounded annual growth rate of 2.5%. The industry worldwide is valued at $498 billion in 2007, the growth in Asia pacific market is growing even at greater than already developed markets of Europe. The Chinese market which is the top market for beer industry has shown massive Compounded annual growth rate of 10.5%. This increase in the growth rates suggests that industry is growing steadily and in turn it is also affecting the existing market shares of many companies which are resulting in acquisitions and mergers to maintain competitive edge in the market. The competitive rivalry is moderate because competitive rivalry is high when industry is already saturated and big fishes eat small fishes through adapting cost leadership or differentiation strategy. As we all know that beer is consumed in many countries and this industry is global itself from the nature of its products. The major industry players in terms of volume market share are InBev, SABMiller, Heineken and Anheuser-Bush, these all companies operates globally with the majority market share in the Europe and American region, these all companies operates globally with the majority market share in the Europe and American region.

Recently the mergers and acquisitions deal of almost $200 billion was seen in the overall beer industry which also reflects that companies are trying to achieve economies of scale and greater market share. Only old companies are still growing through organic growth otherwise many new companies and the companies which are incorporated in the late 90’s are following aggressive growth strategies of mergers and acquisition even big companies like InBev which is considered as the second top most company in terms of Volume and market share is also going for acquisition to further enhance its market share United states which is an operational base of Anheuser-Bush. As it can be seen below that even the overall growth is declining but industry revenues are increasing after every year.

Global Market Value for 2003-2012E in Billions of US Dollars
Year	U$ bn	Growth	CAGR 2004-07	CAGR 2008-012E
2003	452
2004	463	2.41%
2005	474	2.42%
2006	486	2.53%
2007	498	2.54%	2.5%
2008	507	1.85%
2009	514	1.38%
2010	523	1.59%
2011	531	1.70%
2012	541	1.79%		1.6%

It is evident from the global beer market value and growth chart that after 2009 the growth is slowly and gradually increasing. The consumer behavior is also changing and this change is also expected with great certainty which is driving this increasing growth rate after 2009.

Furthermore economic growth and raising disposable income will also play its part in the improving growth of beer industry

DO BIG BREWERS MAKE SENSE?

Molson Coors and Carlsberg they are big beer brewers all around the globe specially in Canadian and European market the recent Acquisitions by these big giants has changed the industry dynamics significantly and the whole market shares redistributed especially after these acquisition. The creation of SABMiller in 2002 and Inception of InBev in 2004 and the joint venture between Molson Coors and SABMiller where they combined their US operations.................

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