Analysis of the acquisition of Absolut Vodka by Pernod Ricard
- Key problems and key questions for Pernod Ricard
- Situation and statement at the moment for Pernod Ricard
- Some recommendations about how to make the right decisions
- Valuation and overpaying
- Valuation: a part of subjectivity and objectivity
- Bidder valuation, corporate governance, and value management
- Most commonly used valuation methods
- Growth rate used, valuation and hidden costs
- Postmerger integration costs ? Hard costs to measure
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.
[...] As an introduction of the analysis of the merger of Pernod Ricard and Absolut Vodka, a definition of a merger seems to be necessary. A merger is a combination of two corporations in which only one corporation survives, and the merged corporation goes out of existence. In a merger, the acquiring company assumes the assets and liabilities of the merged company. This business transaction is sometimes called statutory merger? which is different from a subsidiary merger, which is a merger of two companies in which the target company becomes a subsidiary or part of a subsidiary of the parent company. [...]
[...] -How can Pernod Ricard reinforce its position in USA with the acquisition of Absolut Vodka whereas Diageo positioned itself number one and Bacardi number Pernod Ricard has to develop and accelerate its strengths on the market for Vodka. The group needs to organize the distribution of its new brand through the existing networks (of the acquired firm or of the one which acquires), but this represents a new challenge that also can be an advantage for the biggest competitor Diageo; in case of failure. [...]
[...] As primary sources, it will be an advantage for Pernod Ricard to meet the main actors of the distribution channels (also hotels, restaurants, etc.) and try to negotiate or to take information about how to adapt the supply and how to make known the new product of the brand: Absolut Vodka What can go wrong with this kind of acquisition and how to prevent it? : Some recommendations about how to make the right decisions The main risks are the integration of two different cultures which are ingrained in teams which were competitors and are now colleagues in a context where there are synergies. [...]