Mergers are when two businesses come together to form one company (Middleton & Smith, 2016). The merger between Anheuser-Busch InBev and SABMiller was a horizontal merger because both of them were in the same industry. In this case, it was the beer industry. The aim of forming the merger was to ensure industrial consolidation. The merger between Anheuser-Busch InBev and SABMiller would increase their market power and reduce costs of operation.
The merger between the two firms would lead to the emergence of a monopolistic market that would be detrimental to competitors. It would also expand their market to different geographical areas, in this case, South Africa. The merger will see the two firms control 30 % of the beer industry in the world making it one of the largest (Hopkins, Le, Mandim, Ries & Vergara, 2016). The merger was estimated to have a capacity to generate $104 billion and become one of the top five mergers upon successful consolidation. The challenge however in the merger formation was the regulatory constraints and the existence of a debt of $50 billion (Hopkins et at., 2016). The positive outcomes of mergers are like synergies such as an increased combined value that ensure increased efficiency and revenue due to increased market power (Middleton & Smith, 2016). Anti-laws that exist had limitations on the merger because it was believed to limit distribution channels and was a threat to competitors.
In my view, the merger between Anheuser-Busch in Bev and SABMiller would lead to loss of jobs and work-related challenges (Bomey, 2016). This will be attributed to the closure and movement of some offices like those in England. According to Middleton & Smith (2016), negative impacts of mergers in the internal management of the firms include culture and stress where there is reduced satisfaction, increased employee absenteeism, and turnover, low job morale.
In their study, Hopkins et at. (2016) criticized the proposal by Anheuser-Busch InBev of the buyout offer which they cited as having undervalued the SABMiller present value and it was not objective. It proposed to buy each share at PS38 which was below the strategic global position of the SABMiller where it was trading at PS29.34 (Hopkins et at., 2016).
Anheuser was also criticized for using a competing forcing style. Anheuser- Busch InBev claimed that the buy-out offer they had given was 44% more than what SABMiller was trading at (Hopkins et at., 2016). This was criticized because the negotiation for the merger was highly publicized and Anheuser -Busch InBev used rhetoric to bully SABMiller to accept their terms. Anheuser-Busch in Bev was accused of saying the opposition from SABMiller lacked credibility.
The proposal by Anheuser-Busch InBev was also criticized because the price they offered they could not also achieve. The merger was also estimated to take a long time to come to an agreement. Anheuser -Busch InBev was also accused of having communication were fixed as well as hasty decision making and impatience (Hopkins et at., 2016). It is also believed that Anheuser-Busch InBev would lose in the long run if it continues investing in anti-trust issues.
Alternative outcomes that would ensure the success of the merger would have involved of use of collaborative in negotiations of the merger (Hopkins et at., 2016). Anheuser -Busch InBev should have approached the negotiation by first addressing the concerns by SABMiller's' stakeholders. They should have given an assurance that they would follow all the regulations failure to which they would pay a break out fee to SABMiller of $3 billion (Hopkins et at., 2016).
They should have used an integrative style by using problem-solving strategies by addressing the major concerns of their two stakeholders of SABMiller, Altria, and BevCo. According to Hopkins et at. (2016), they should have focused on the compatible interests of both firms. The deal should not have decreased the amount of the share capital upfront so as to address capital gains tax issue. An alternative would have been offering a cash discount to the share price with a 5-year lock-up deal. This would have enabled the shareholders not to pay large amounts of tax (Hopkins et at., 2016). They would also have had the same dividends, voting rights, and more stock options.
Policy issues that emerged from the merger Anheuser-Busch InBev and SABMiller included the antitrust issues. The merger between the two firms would become the largest of its kind in the world (Hopkins et at., 2016). Antitrust issues are formed with an intention to reduce monopoly and oligopolistic nature of companies. The rules put forward to try to limit the restraining of competitors by merger firms. Large mergers like the one between Anheuser-Busch InBev and SABMiller would harm competitors (Middleton & Smith, 2016). It is a horizontal merger that was collusive and monopolistic. As a result of this merger, the prices of products would increase. Middleton & Smith (2016) posit that such a merger would be detrimental and would reduce the supplier's power. It would have an edge in controlling the market with greater profits due to economies of scale but it would suppress smaller competitors. Such a merger would also be a genesis of many nepotism cases, especially where it would to loss of local jobs. Anheuser-Busch InBev in an aim to reduce the hurdles of the merger they had to sell the rights of Corona beer to eliminate issues that would come from antitrust regulations. Upon several negotiations, the merger between the two firms was eventually formed.
Bomey, N. (2016, August 26). AB InBev to cut thousands of jobs after merger. Retrieved from USA TODAY: www.usatoday.com/story/money/2016/08/26/anheuser-busch-sab-miller-job-cuts-ab-inbev/89395790/
Hopkins, K., Le, L., Mandim, M., Ries, D., & Vergara, M. (2016). Anheuser Busch InBev- SABMiller Merger Analysis. 1-17.
Middleton, B., & Smith, M. H. (2016). The Anheuser-Busch InBev - SABMiller Merger: An Analysis of Motives and the Internal and External Impacts of the Merger. JRSBM vol 2, 1-20.
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