Analysis of the acquisition of Absolut Vodka by Pernod Ricard

Résumé du document

We choose the company Pernod Ricard because it is one of the world's leading companies in the production of wines and premium spirits. This company has now become bigger since the old rivals Pernod and Ricard have merged to form Pernod Ricard SA. Through subsequent acquisitions, Pernod Ricard acquired the status of a worldwide conglomerate and earned second place, behind the leader of this market, the British Diageo. The main purchases or mergers/acquisitions took place in 1988 (Irish distillers), in 2001 (Seagram), and in 2005 (Allied Domecq). Business intelligence has played a big role in each decision made by Pernod Ricard. However, for every action on the wines and spirits market, the French firm needs to master and protect all the strategic information which can allow it to avoid mistakes, competitive, its own structure, penetrate the American market with Vodka, and maybe become number 1.

In order to deal with our key topic, we studied the key problems and the key questions of the new acquisition in detail, as it represents another step in the development of the French drinks giant. Through a competitive assessment, we will evaluate how Pernod Ricard makes its strategic decisions, and how the company acts. This topic shows the importance and the necessity of acquisitions for a lot of companies, in a long term vision strategy. Thus the competitive aspect in the activity of takeovers, mergers and acquisitions is emphasized.

Extraits

[...] With a technique of benchmarking, Pernod Ricard can stay informed about how its competitor behaved. The possibility to buy some shares in other society (on the market of spirits) seems to be conceivable in order to size up until when the company has to react. Even if Pernod Ricard has a strong notoriety and a powerful know-how which can makes the firm to grow and to overtake most of its rivals, the company has to research data that could help it to face the moves of the environment and keep an eye and watch out to it. [...]

[...] Instead of using antitakeover defences to prevent takeovers, directors and managers should bear in mind that one of the strongest antitakeover defences is to increase the value, and resulting price, of the company. Value maximization can be one of the more potent antitakeover defences. When the company is not managed in a way that increases the value of the company, it can become vulnerable to a takeover. However, when management is doing a good job and the value of the company rises in the market, it becomes a more expensive target. [...]

[...] It allows the group standardise its data collection and facilitate business intelligence reporting globally”. Pernod Ricard decided to adapt this system in USA and UK in the next months and uses already that in Asia. This system was indeed required to allow the french MNC of wines and spirits to consolidate disparate systems (of information management) which follow the different operations of the company and particularly acquisitions. Pernod Ricard wants to set up a common ERP system to overhaul its analytical tools, region by region (on the different markets). [...]

[...] The problem of scouting can be a strong brake to development when the market uncertainty is high and the technical uncertainty is low (the case of the market of spirits). This new acquisition was the most expensive one for Pernod Ricard. This overbid in terms of price could appear as a bias which could be a disaster if the Absolut Vodka doesn't meet success. Postmerger integration costs Hard costs to measure The company Pernod Ricard has to take care of the postmerger integration costs. [...]

[...] Valuation: a part of subjectivity and a part of objectivity When we review the main valuation methods, they appear scientific and exact. There are accepted methodologies and exact methods of determining a company's value. However, with each method, important and key assumptions enter into the valuation model. These assumptions are often derived based on subjective determinations made by the evaluators. They make these subjective judgments based on their experience and any other knowledge they may draw on. When one considers the subjectivity of the valuation process, it may be easy to conclude the opposite. [...]