Today several companies choose to combine in order to create only one entity. They an 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.
[...] Cash for stock transaction: If this solution were chosen, Brahma would need to have a clear source of funding the cash payment, and to know how many shares will have to be exchanged. In my point of view, the amount of consideration to be paid depends on the form of payment. When a stock for stock transaction is chosen, the price of the stocks can affect a trade when cash cannot. Buyers tend to offer stock when they believe their shares are overvalued and cash when undervalued. [...]
[...] Objectives for the merger: Become a leader on the Brazilian market, and expand its market shares in South Americans country and worldwide. Brahma will also benefit from the production of soda of Antarctica and will be able to enlarge its range of products. Antarctica group: The Antarctica is another group well known of the Brazilian market, who was created in 1885. The company was originally a Brazilian beer brewing company producing the Antarctica beer, that later started to produce sodas such as the Guaraná Antarctica. [...]
[...] We know that Antarctica have a lack of customer focus, failures in distribution network and have to face a rising competition for its beer segment. Moreover it's advertising reflects an old company, who also have debts to recover. Antarctica wants to benefit from Brahma aggressive expansion. In a merger one of the main issue is the form of payment and the liability of shareholders. We need to know how much value should Antarctica's shareholders receive in consideration for the interest in their firm? [...]
[...] SYNERGIES Tax Reduction synergies Cost reduction synergies Revenue enhancement synergies BENEFITS Have a monopoly on the Brazilian beer and soft drink market. Acquire a pricing power on the market and a bargaining power on supplier and distributors. Economies of scale. Following the merger the two groups will be more able to become a global brand and be stronger on the multinational market against multinational like Coca-Cola or Heineken. PRICE Will be determine for each firm depending on the form of transactions, their objectives, the potential risk and the financial situation of both companies. [...]
[...] wealth. Pricing power on market Increase its market share and bargaining power on in Brazil and Latin distributors and American countries. suppliers. Lower taxation. Monopoly Brazilian Beer and Soft drinks markets. Economies of scale. Pricing power on market and bargaining power on distributors and suppliers. THREATS The merger can turn into High competition on the an acquisition by Brahma. market. Delays in the process Government can be afraid of might threaten the the potential monopoly company's survival. following the merger. [...]
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