Mergers and acquisitions - Brazilian beer negotiation

Résumé du document

Today several companies choose to combine in order to create only one entity. They can decide to merge for various reasons, it can be to create values, acquire a financial stability situation, improve its strategic position or to offer the stockholders of one company securities. They are also other way a company can develop it-self, by making an acquisition of another company; make a joint venture or a partnership. In this case we will study the merger between Brahma and Antarctica, two famous brewers in Brazil. Before focusing on the merger, we will analyse the two groups before the merger in order to know their situation before the merger and their objectives towards it.

The Brahma beer is a famous brazilian beer created in 1888. The spirit of the group has spread all over the country, mainly due to its innovative and striking advertising campaigns, who represents the Brazilian culture. The group manages a range of almost 20 beers under the main name "Brahma". All beers are different, but the company is well known for its original beer, which is a soft beer. Through its products, the group is spreading its philosophy, living life with effortless flare.

Extraits

[...] Objectives for the merger: Become a leader on the Brazilian market. Antarctica will benefit from the high presence and notoriety of Brahma. The group wants to ensure a better financial situation. In 1999 the two companies planned to merged in order to from a dominant Brazilian beverage group, they both have high potential and strengths for this merger. Brahma can provide a wonderful opportunity for a beer that could meet consumer expectations across the globe, and Antarctica is producing a large range of sodas. [...]

[...] Moreover a stock for stock transaction will be more taxed then cash for stock transaction. Plus, in certain situation the votes of shareholders will be needed. The payment of the transaction will be made on the moment of the merger therefore the price of the stock can change. Stock is used less often where the target is small relative to the buyer. There are different forms of payment that are more or less risky for investors: Cash for assets: Cash for stocks Cash merger Stock for stock Here are the different implications of those forms of payments: We can conclude that the amount to take into consideration wills depends on the forms of payment and the risks it will imply for the company and shareholders. [...]

[...] Before focusing on the merger, we will analyse the two groups before the merger in order to know their situation before the merger and their objectives towards it. Brahma group : “Brahma, enjoy everywhere” The Brahma beer is a famous brazilian beer created in 1888. The spirit of the group has spread all over the country, mainly due to its innovative and striking advertising campaigns, who represents the Brazilian culture. The group manages a range of almost 20 beers under the main name “Brahma”. All beers are different, but the company is well known for its original beer, which is a soft beer. [...]

[...] However does those positions of these players be reflected in special terms in the new firm? Such special terms might include different prices or exchange ratios for shares, special voting rights, and special dividend payments. In order to valuate a firm and determine the maximum and minimum exchange ratio we need to consider several factors: The inflation Currency exchange rate Tax rate The timing of cash remittance Accounting principles of the firms Political risks in the countries The market segmentation The social or cultural issues Investors will look more closely to other factors: Price of underlying asset Exercise price Time Risk Dividends they will perceive Interest rates We also need to take into consideration the total number of shares and the price of the shares before the deal. [...]

[...] Deal design This deal design will guide the future negotiation, all issues will have to be discusses in order to avoid any conflict of interests. They will also have to determine their opening bid and their walk-away price. In the case of a stock for stock transaction, the walk away price of Brahma will be two shares of Antarctica for one share of Brahma. Face with this deal design the two parties will meet and discuss all those different issues and assess them. They can decide also to revise the final proposal. [...]