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The Anheuser-Busch InBev - SABMiller Merger: An Analysis of Motives
and the Internal and External Impacts of the Merger
Bradley Middleton
Melanie Hudson Smith
Plymouth Business School, University of Plymouth, UK
Abstract
The purpose of this research is to develop an understanding of merger drivers as well as the merger’s effects on
the internal and external stakeholders in application to the Anheuser-Busch InBev SABMiller merger. This is
achieved by utilising semi-structured qualitative interviews and quantitative data analysis of share prices and
comparing the results against post-merger culture management, synergy, stockholder value and merger
theories. This project has identified issues with applicability of theory in application to a specific case study
because most theory is developed using large quantities of data without in depth analysis to a specific case
study. The drivers behind the Anheuser-Busch InBev SABMiller merger have been identifies as have the impact
on internal and external stakeholders and stock price with evaluation from theory. The project has given a
detailed understanding of the case study merger’s causes and effects. Using the Anheuser-Busch InBev
SABMiller merger as a basis for the application of theory the driving forces for the acquirer and acquired
company have been highlighted and substantiated along with the impact of the merger on internal and external
stakeholders. The merger has been observed to be driven by market concentration and growth objectives and
accepted because of shareholders desires. The internal stakeholders have yet to experience massive cultural
changes but some synergies are already being implemented. External stakeholders are influenced in many ways
though it is observed that the impact differs from traditional merger theory. The project presents the ability for
future researchers to analyse other mergers, evaluating established literature.
Keywords
Merger Drivers, Organisational Culture, Synergy, Shareholder Value, Porter’s Five Forces
Introduction
This research paper is an evaluation of the internal and external impacts of merger activity specifically applied
to the Anheuser-Busch InBev-SABMiller merger to effectively evaluate the effects that mergers have on
internal and external stakeholders as well as an industry as a whole to provide a holistic analysis of merger’s
implications. The project focuses on the drivers of the merger, the internal impact (synergies, culture and
business practices) and the external impact (customers, competitors, suppliers). To achieve this, a qualitative
and quantitative approach will be used to analyse the views of employees and stock price of the companies and
their main competitors against merger theory.
Research Rationale The aim of this project is to assess the effects that the merger between global brewing market leader, Anheuser-
Busch InBev and second largest brewer in the world, SABMiller, internally (related to culture, synergies and
business practices) and externally (involving competitors, customers and suppliers). SABMiller agreed to be
acquired in October 2015 for £71 billion (BBC, 2015). It is the largest acquisition in British history and the
fourth largest acquisition globally (Marlow, 2015). The merger will bring together the world’s two largest
brewers, forming one company with control of 30.5% of the global beer market (BBC, 2015) with 224,000
employees, producing 783 million hectolitres of beer annually (Farrell, 2015). The size of this merger will have
a profound effect on employees, customers, suppliers and competitors as well as industry shareholders which
demonstrates a need to identify and understand the immediate and long-term effects of the merger both
internally and externally. Furthermore, mergers are an increasingly important aspect of international business
with many significant effects on a variety of integral areas within a business and in an industry. This provides a
wide scope of research and the possibility for a range of analysis.
Literature Review
Merger Drivers Mergers are when two businesses join as one company taking over the other. There are three types of mergers
between firms; horizontal, vertical and diversifying (Bishop, 2004). Horizontal mergers consist of mergers
between competing firms within the same industry (Yao, Zhou, 2015) making the Anheuser-Busch InBev-
SABMiller horizontal. One of the main drivers for mergers of this type is industry consolidation. By
consolidating an industry the acquiring firm will increase in market power as well as allow for cost reductions
and synergy. Furthermore, horizontal mergers can also be undertaken as a means of spreading geographically or
into other markets (Hitt, Harrison, Ireland, 2001). Within the pharmaceutical industry there are many large scale
horizontal mergers. These mergers have been driven by technology and patent acquisition, economies of scale
and most importantly to defend against the high power of buyers within the market (Economist, 2007). This
supports the notion that horizontal mergers can be driven by a firms desire to increase its power within a market.
Morán and Panasian (2005) stated that the strategic motivator behind mergers is to generate synergy to establish
a competitive advantage position and ultimately improve the performance of the combined firms generated
through economies of scale and other efficiency and cost improvements.
Merger waves can be triggered by either economic shock or by intangible factors without bearing on underlying
economic conditions (Yao, Zhou, 2015). The first cause for merger waves, economic shock, is tangible,
generally relating to the cost, demand or regulatory environment within an industry. While the second cause is
intangible, generally involving rumours or changes in expectations by key stakeholders. However, Andrade et al
(2001) states that there are many reasons for mergers including efficiency seeking aims often involving
economies of scale or other “synergies”, attempting to increase market power, aiming to monopolise a market
and diversify product portfolios. Though some of these factors do coincide with Yao and Zhou’s (2015) beliefs
regarding the driver behind mergers Andrade et al’s (2001) notion suggests that the reason can be both tangible
and intangible but mostly revolving around a firms desire to expand.
The choice for merging horizontally or vertically is dependent on the economic activities of unrelated third
parties to merge. Yao and Zhou (2015) found that market structure stability is determined by the relative
intensity between vertical and horizontal externalities, and the comparative competition concentration of actors
upstream and downstream. Horizontal mergers reduce horizontal externalities yet aggravate vertical externalities
(Yao, Zhou, 2015). Horizontal mergers are likely to lead subsequent mergers within a market (Gabszewicz,
Thoron, 1991) which suggests that there are likely to be more mergers in the global beer market in the future.
This hypothesis suggests the driver for horizontal mergers are reactions to the activities of competitors.
Nilssen and Sørgard (1998) analysed many consecutive horizontal mergers to determine the effect that strategic
competition and rival actions affect merger decisions. They found that the decision to engage in horizontal
mergers is based on the activities of competitors. This can be used to support Yao and Zhou’s (2015) assertion
that the primary driver behind horizontal mergers is the actions of competing firms.
Internal Impact of Mergers
Culture and Stress Post-merger culture management generally receives low priority from managers who focus on the operational
aspects of integration (Marks, Mirvis, 2011). Mergers are frequently associated with reduced morale, job
satisfaction, productive behaviour in addition to increased employee turnover and absenteeism, rather than with
increased financial performance (Morán, Panasian, 2005). The human element is highly important during
mergers. Davy et al (1988), posits that human resource issues are responsible for between one-third and half of
all failed mergers. Consequently, the underlying causes of employee resistance to mergers need to be
investigated carefully by managers because employees have a great impact on the success or failure of a merger.
This suggests that Anheuser-Busch InBev SABMiller should be making active steps to deal with the human side
of the merger.
Mergers between related firms are widely accepted to lead to layoffs. These mergers are more likely to involve
employee layoffs as explained by the synergy view of mergers (O’Shaughnessy, Flanagan, 1998). This view
suggests that post-merger there will be duplicated business functions that make certain roles within the new
organisation redundant. They determined this by analysing the fifty largest mergers in the USA from 1989-1993
discovering that mergers undertaken by related companies are more likely to have a redundancy announcement
(O’Shaughnessy, Flanagan, 1998). These cost saving measures are able to occur due to the duplicated business
functions that are created during mergers, these are likely to be prevalent in horizontal mergers such as the case
merger.
Mergers are found to generate increased stress levels within employees (Panchal, Cartwright, 2001). They
conducted an empirical study to test the levels of stress experienced sales employees within a newly merged
organisation discovering that employees from the subordinate company in an acquisition have higher stress and
significantly lower job satisfaction. This can also be compounded by an employee’s feeling of being
disconnected from the organisation due to perceived cultural shift (Ribando, Evans, 2015) particularly relevant
in the event of a merger. Additionally, Brown and Humphreys (2003) proposes that an employee develops a
narrative to understand their organisation through culture. Mergers shift the accepted narrative causing
disruption within the workplace as employees reassess their organisational identity and the way they fit in an
organisation. This suggests that mergers cause disruptions to work and makes employees feel anxious or
nervous about the unknown nature of post-merger organisational culture which reduces productivity and
increases stress.
There are many ways that culture can be managed; Berry (1984) identified four ways through which
acculturation takes place within a group. These methods outline ways that multiple groups adapt to each other
and resolve developing clashes. In the case of mergers, the characteristics of the acquired and the acquiring
companies determine the method of acculturation to be utilised. These modes are Integration, Assimilation,
Separation and Deculturation.
Integration is initialised when members of the acquired firm aim at preserving their own corporate culture and
remain autonomous of the acquiring company (Nahavandi, Malekzadeh, 1988). London (1967) contended that
while integration comprises interaction and adaptation between two cultures and requires reciprocated input by
both groups, integration retains the cultural identity of both groups. This means that the acquired company’s
employees are able to maintain their own beliefs and cultural elements as well as organisational practices which
make them unique. Anheuser-Busch InBev and SABMiller are highly related with a high degree of
multiculturalism which would make integration an attractive method of acculturation. This would be
compounded if the SABMiller employees wished to preserve their own culture and this culture was attractive to
Anheuser-Busch InBev. Assimilation is a unilateral process in which one firm will freely assume the corporate
identity and culture of the other (Berry, 1984). The members of the acquired business renounce their corporate
culture along with many of business practices to adopt the culture and business practices of the acquiring firm
(Nahavandi, Malekzadeh, 1988). This could happen for Anheuser-Busch InBev SABMiller because of the
related nature of the business. However, it is limited because the companies are not unicultural. Separation
comprises of the acquired company’s attempt to preserve their organisational culture and practices though
maintaining separation and independence from the acquiring company (Berry, 1984). This is an unlikely choice
in the case of Anheuser-Busch InBev SABMiller because though SABMiller is multicultural, the two businesses
are related. This method would severely inhibit the synergies available. Deculturation is not applicable to the
Anheuser-Busch InBev SABMiller merger because they are related companies with a multicultural business
(Nahavandi, Malekzadeh, 1988).
The acquired firm’s mode of acculturation is dependent on the value placed on their own and the acquiring
cultures. The acquiring firm’s selection of acculturation method is dependent on the level of multiculturalism
and relatedness between the two firms. When the acquired business wishes to preserve its culture whilst
perceiving the acquiring culture as attractive, and, the acquiring firm is multicultural and in a similar industry;
Integration is the recommended acculturation method (Nahavandi, Malekzadeh, 1988). This suggests that
Integration would be the logical choice for the Anheuser-Busch InBev SABMiller merger.
Most managers state that underestimating the necessity and difficulty of integrating culture is a major oversight
during post-merger integration. Culture is an incredibly important element of mergers because “the failure of a
merger to achieve its financial or strategic objectives is often blamed on a clash of cultures between the
combining entities” (Cartwright, Price, 2003). This suggests that Berry’s (1984) and Nahavandi and
Malekzadeh’s (1988) theory that there are only four methods of cultural integration is flawed as it is
reductionist, simplifying the role of culture within an organisation.
A further criticism of the Modes of Acculturation theory is Tajfel’s Social Identity Theory (2010). SIT argues
that members of an organisation show preference towards members of their own in-group and hold a negative
view of members from outgroups as a way to enhance the relative standing of their own kind. The bias of us
versus them mentality is most prevalent when there is a perceived outside threat (Marks, Mirvis, 2011). This
makes acculturation extremely difficult during mergers compounding the view that Modes of Acculturation
Theory is reductionist. This is supported by Mana, Orr and Mana (2009).
Synergy Synergies enable two firms to increase their combined value when brought together as one company. Synergies
are frequently named as the incentive behind pursuing acquisitions and mergers. These can take the form of
increased revenues through greater market power or new product introductions, as well as, through cost
reductions caused by increased efficiency from consolidating production facilities and suppliers and eliminating
repeated processes in areas such as recruitment or marketing (Sheen, 2013). Synergy theory is based on the
analysis of large quantities of historical data increasing the validity of the theory. Synergies are most likely to
occur in horizontal mergers such as the Anheuser-Busch InBev SABMiller merger.
External Impact of Mergers
Shareholder Value Extensive research by Jensen and Ruback (1983) and Jarrell, Brickley and Netter (1988) into the impact of
mergers on shareholder value from hundreds of historical cases concluded that mergers produce value for
stockholders of the merging firms, with the bulk of the gains being acquired by the stockholders of the target of
acquisition. This conclusion was drawn from analysing the announcement-period stock price reaction to
mergers. Their findings are supported by Andrade et al (2001) who determined that mergers appear to generate
shareholder value, with the majority of gains being added to the target company.
There are many reasons as to why companies aim to increase shareholder value. One purpose is that if
shareholders are happy with the company’s performance they are likely to continue investing in the company. A
further driver behind mergers is more internal and self-serving. Many directors and officers of corporations are
also shareholders and it is in their best interest to achieve their maximum value (Coontz, 2004). Shareholder
value can be generated through mergers.
Langetieg (1978) studied pre and post-merger effects on shareholder gains with a three factor performance
index. During his investigation, he analysed two points before the merger announcement date, 18 and 6 months
before, he observed a net increase in share prices of 6.11% and -1.61%, respectively for the acquirer.
Langetieg’s 1978 study showed that the acquiring shareholder gains were statistically insignificant and the
acquired shareholders only obtained a small benefit of 12.9%. From this it can be suggested that there are no
significant benefits for shareholder value generated by mergers. This view is reinforced by Coontz (2004) whose
study into the effects of mergers on shareholder wealth yielded that on average the shareholder value of the
acquiring firm decreases. This is supported by Sugiarto (2000) discovered that the share value of the acquired
firm rise significantly when the merger is publically announced. This is particularly prevalent when the
acquiring firm obtains over 50% of the target firm’s shares. The share value then falls when the results of the
merger are known. While this is the case for the target firm the acquiring company’s share price generally falls.
From this it is possible to infer that it is the SABMiller shareholders who will benefit the most from the merger.
Competitor share prices are anticipated to reduce as a result of large competitors merging (Sugiarto, 2000);
however, Gabszewicz and Thoron (1991) suggest that these largescale mergers are likely to trigger subsequent
mergers amongst competitors; rival share price is likely to increase. This means that Heineken and Carlsberg
share prices are likely to increase.
Industry Eckbo (1983) and Stillman (1983) employed a test approach based on company stock price rather than with
product price data to deduce the anticompetitive implications of horizontal mergers. However, the mutual stock
returns to the acquiring firm and the target company cannot be used to distinguish efficiency and market power.
These returns represent the total effects that are expected from cost reductions and revenue increases that are
generated through synergies. Conversely, changes caused by mergers that relate to expected future product
prices convert into abnormal stock returns of entities upstream and downstream in the product production
process and the company’s market rivals. For collusive and monopolistic mergers product price usually
increases which is beneficial to other players in the market (Eckbo, Betton, Thorburn, 2008). This suggests that
the Anheuser-Busch InBev SABMiller merger will have a positive effect on competitors meaning that Langetieg
(1978) findings that merger announcements have a negative effect on the industries wealth is unreliable when
applied to mergers that create an anticompetitive market environment such as oligopoly or monopoly markets
such as in this case.
One of the primary drivers of horizontal mergers is a company’s desire to increase its market share therein their
market power. Schumann (1993) proposes that market power theories have different repercussions for rivals
with small versus large market shares. By obtaining greater market power it is generally the case that the
acquiring firm is able to increase their product price. Within an oligopolistic market, this is beneficial to the
company’s rivals as they could match their prices without losing customers. However, it is possible for a merger
to be harmful to other members of the market. Mergers are generally harmful to competitors as these mergers
are usually efficiency seeking which improves the acquiring company’s competitiveness while its rivals remain
the same (Schumann, 1993). This illustrates both positive and negative implications to competitors as a result of
the Anheuser-Busch InBev SABMiller merger.
Contrary to popular opinion, mergers have been observed to be beneficial to consumers. Fee and Thomas (2004)
and Shahrur (2005) examined the wealth effects of mergers of over 1000 mergers between them with
applications of both upstream and downstream stakeholders. The two papers had similar conclusions. They
discovered that there was little evidence for the assertion that mergers increase monopolistic collusion and that
the main effects are seen with improved efficiency and greater buying power. These findings suggest that
mergers will provide the merged firm greater power to demand lower prices from suppliers while also
improving profitability by cutting operating costs. These factors may actually lead to less monopolistic
behaviour and suggests that mergers may be beneficial to consumers. Fee and Thomas (2004) and Shahrur
(2005) both reject the idea that mergers allow for companies to benefit at the expense of consumers due to the
lack of systematic evidence supporting that sentiment. Both parties state that the companies that experience the
greatest benefits from merging provide the greatest benefits to consumers. However, they did identify areas
where suppliers were negatively affected by mergers due to the suppliers having less selling power. This
suggests that Anheuser-Busch InBev SABMiller will be positively affected by the merger.
Porter’s Five Forces Porter’s (2008) five forces of competitive advantage can be used to explain external influences to a company’s
decisions. Though commonly used to explain and evaluate mergers, the theory was designed to analyse the
strength of an overall industry rather than a specific company reducing its validity (Coyne, Subramamiam,
1996).
Threat of new entrants New entrants increase the necessity to compete for market share through pricing, costing and capital investment.
The threat of new entrants is dependent on the barriers to entry into an industry (Porter, 2008). Barriers to entry
are highly influenced by merger activities, specifically including access to distribution channels and the supply-
side and demand-side economies of scale. Synergies play a significant role within this dimension. Industries
with large firms such as those created through mergers are more difficult to enter. Merged companies experience
supply and demand economies of scale through synergies created from higher production volumes, expanded
product portfolios and harmonised distribution (Porter, 2008). These synergies make it more difficult for new
entrants are most easily achieve through mergers (Warren, 1992) reducing the threat to Anheuser-Busch InBev
SABMiller.
Bargaining power of suppliers Powerful suppliers capture more value for themselves because they can demand greater prices. These suppliers
are able to reduce the profitability of an industry (Porter, 2008). The power of suppliers can be highly dependent
on buyer concentration (Wilkinson, 2013). When two companies merge, the power of suppliers can be increased
or decreased, post-merger there are fewer buyers in a market suggesting that the Anheuser-Busch InBev
SABMiller merger will be harmful to suppliers.
Bargaining power of buyers Mergers result in a buyer’s loss in power because market concentration removes their ability to choose other
suppliers. Hamilton and Ho (2000) discovered slight quality reductions due to mergers in the health industry
signifying that the Anheuser-Busch InBev SABMiller merger will negatively affect customers. Porter (2008)
suggests that horizontal mergers reduce the competition in a market by reducing the bargaining power of buyers
industrywide. This is in direct opposition to research by Fee and Thomas (2004) and Shahrur (2005).
Threat of substitutes The threat of substitutes is dependent on the switching cost, the price difference, the quality difference and the
attributes of the product (Hines, 2013). The threat of substitutes is likely to be reduced post-merger because the
merged firm will be more resilient to them (Cyert, Sok-Hyon, Kumar, 2002).
Rivalry among competitors Competition can take the form of pricing, innovation, advertising and service improvements. High levels of
rivalry reduce the profit potential of an industry. The rivalry among competitors is dependent on the competition
intensity and the basis of their competition. In an analysis of the UK metals industry it was observed that
mergers take place when it is too costly to compete through other means due to market stagnation (Marketline,
2014). This suggests that Porter’s (2008) findings that mergers reduce competition may be more correlation than
causation because mergers occur in markets where competition has stagnated. Furthermore, Schumann (1993)
found that mergers increase rivalry and create competition. Mergers create synergies (Sheen, 2013) leading to
lower production costs allowing a merged company to compete using price or quality more effectively. Porter
(2008) stated that these synergies were caused through merger activity making his claim that mergers would
reduce competition is suspect to criticism. The Anheuser-Busch InBev SABMiller merger is likely to have both
negative and positive impacts on competitors.
The Present Study
The literature review illustrates the limited scope and scale of most investigations into the effects that mergers
have on a business and industry. The majority of academic literature related to mergers is highly focused on
only one element that is influenced by merger activity with no eclectic investigations. Merger theories are
commonly based on analysing large volumes of data gathered from the merger activity of multiple companies
over a large period of time. This increases the validity of the theories, however, the results and conclusions are
generalised which demonstrates a gap in research when applied to an in-depth case study. Furthermore, some
theories such as Porter’s Five Forces (2008) and SIT (Tajfel, 2010) are merely adapted to be used to analyse and
evaluate merger activity. Though the research is widely regarded as comprehensive, it is not specifically merger
theory and is therefore suspect to criticism. The research appears to either take a company view or an industry
view on the effects of merger actions. This has identified a significant gap in literature involving the evaluation
of the multiple internal and external effects of merger activity on a specific case study. Therefore, the aim of this
paper is to analyse both the company and industry effects of a specific merger.
Research Objectives The Anheuser-Busch InBev SABMiller merger is between closely related companies and will form a monopoly
within the global beer market which suggests that the merger will involve synergy creation, cultural integration
and be harmful to suppliers, competitors and customers.
- To determine whether the drivers behind the Anheuser-Busch InBev-SABMiller merger are as
suggested by theory
- To ascertain the extent of the impact the merger has had on synergies, culture and business practices
within the companies and compare these findings with literature
- To define the ways that the merger has effected external stakeholders such as customers, competitors
and suppliers in relation to literature
Methodology
Research Philosophy The assumed research philosophy is Pragmatism which states that theory is only relevant when supported by
action (Kelemen, Rumens, 2008) involving both quantitative and qualitative research methods. This is because
there are many ways of interpreting questions and undertaking the research (Saunders, Lewis, Thornhill, 2012).
My ontology led to the selection of this philosophy because of multiple ways of answering the research question
so it is imperative to utilise more than one research method (Bandaranayake, 2012). This is because the aim of
this project is to understand the internal and external impact of Anheuser-Busch InBev-SABMiller’s merger
activity. It is impossible to build a holistic understanding of the internal and external impact with only a
Positivism or Interpretivism philosophy due to the multifaceted nature of the study. The project uses qualitative
interviews and quantitative data analysis. The qualitative interviews build an understanding of the internal
impacts of the merger as well as external impacts from SABMiller and Anheuser-Busch InBev employees while
the quantitative analysis of stock prices to tests Stockholder Value theories.
Research Strategy Primary data collection was through semi-structured online qualitative interviews with employees from
SABMiller and Anheuser-Busch InBev. These employees are involved with the international functions and
elements of the two businesses. The interviews build an understanding of the internal impact of the merger and
the drivers of the merger as well as perceived impacts on stakeholders and competitors through the use of 11
guiding questions. These questions were designed to be the basis for my interviews as a means to allow broad
discussion of the key areas of literature. This method of data collection is justified because of the wide
geographic locations of the participants due to the international nature of their work as well as their ability to
provide greater insight into the inner workings of the organisations and the drivers behind the merger. This is the
most effective method of research for this project. Furthermore, Bernard (2006) states that this method of
research gathering is most effective for when it is likely that it would be the only opportunity to gather data. The
time-zone difference and work schedule makes organising interviews difficult resulting in the necessity to gain
as much information as possible within a limited timeframe. Also by using a semi-structured method the
interviewer was able to ask questions in a way to obtain answers from the interviewee that they may not be able
to gain through rigid structured interviews or through written surveys (Jankowicz, 2000).
Using a qualitative approach emphasises the subjective meaning and in-depth understanding of the mergers
impact highlighting the quality and depth of the data rather than obtaining large quantities of broad data gained
through quantitative research (Saunders, Lewis, Thornhill, 2012). This tackled the gap identified in the literature
which generally focuses on broad trends rather than in-depth study. A further justification of this research
method is the need to target a specific population. Other research methods such as surveys would be impractical
due to the specialist knowledge required from participants ensuring the integrity of results. Moreover, due to the
professional nature of the participants and the content of the interview it is important to have questions prepared
ahead of time to appear competent as an interviewer so my questions are taken seriously (Cohen, Crabtree,
2006).
The project supplements the qualitative interviews using a quantitative analysis of stock prices to test the impact
of mergers on shareholder value theories. Share price information will be analysed in relation to theory
(Andrade et al, 2001; Jensen, Ruback, 1983; Jarrell, Brickley, Netter, 1988; Langetieg, 1978). This provides a
deeper understanding of the overall impact of mergers on industries improving the overall quality of the
research. The financial information is used to test theories regarding the influence of mergers on competitor
share price (Sugiarto, 2000; Gabszewicz, Thoron, 1991).
Sampling Method There must be a clearly defined target population when undertaking qualitative research. The sample must come
from this population to ensure collected data is representative of the wider population (McGivern, 2003).
Therefore, it was necessary to draw participants employed by Anheuser-Busch InBev SABMiller involved in
international and strategic aspects of the business to obtain detailed, reliable information generally unknown
outside the company. This is Theoretical sampling involving selecting participants relevant to the research
problem (Glaser, Strauss, 1967). There will also be theoretical sampling when evaluating stakeholder theory
where the sample will be Anheuser-Busch InBev SABMiller, Heineken and Carlsberg because these companies
are the next largest competitors for the case company.
Limitations of Methodology The main limitation of the qualitative research was lack of responses. There are multiple reasons for this
including access to interviews and issues regarding non-disclosure agreements.
There were difficulties engaging in interviews with members of the organisations due to scheduling or
reluctance. These issues restricted the amount of primary research able to be conducted. Scheduling was a
particular issue because the level of importance of the interview was relatively low when compared to work
related tasks and meetings. There were also issues with arranging interviews because of the time zone
differences because interviewees operating across the world. Furthermore, there was a base reluctance to
participate in the research due to the relative sensitivity of its content and the transitional period employees are
experiencing. Some people were unable to answer questions due to non-disclosure agreements forcing their
withdrawal so not to reveal confidential or restricted information.
There were also limitations to the investigation of stock holder value. Due to the reformatting and restructuring
of Anheuser-Busch InBev’s share recording it is not possible to conduct a full and accurate investigation into the
impact of the merger on shareholder value against Langetieg’s (1978) research without specialised knowledge
of the stock market.
Ethical Considerations Due to the nature of the information discussed during interviews, guaranteeing consent and anonymity are
required. Ensuring consent is highly important when conducting research (Torchim, 2006). Interviewees were
informed before the interview of the purpose and intended to use their testimony. Upon request of participation
in interviews a statement outlining the nature of the interview, its purpose as well as ensuring that no personal or
identifying information will be included within the final write-up to ensure anonymity was included.
Results
Six interviews were undertaken from both Anheuser-Busch InBev and SABMiller employees based around the
world alongside stock information for Anheuser-Busch InBev, SABMiller, Heineken and Carlsberg to be
analysed alongside theory to achieve the objectives of this project.
Interview questions There were 11 guide questions [Appendix A] from which the researcher would obtain the information necessary
to achieve objectives. These guide questions were the basis of the interview and the researcher had to ensure that
an answer before the end of the interview.
To determine whether the drivers behind the Anheuser-Busch InBev-SABMiller merger are as
suggested by theory Guide questions 7 and 8 are designed to determine the drivers behind the merger. The purpose of these questions
was to determine whether the merger was driven by worsening economic conditions (Yao, Zhou, 2015), seeking
synergies for competitive advantage (Morán, Panasian, 2005), for entering new markets (Hitt, Harrison, Ireland,
2001) or other reasons.
Employees suggest that the merger was undertaken for driven by shareholders supporting shareholder value and
intangible driver theories (Langetieg, 1978; Coontz, 2004; Yao, Zhou, 2015).
Have you been told the reasons for the merger? 1 No
2 Not sure. The reason I know of is that the price offered by AB InBev was a good value proposition for
SABMiller’s shareholders. That’s it. If there was another reason behind the merger then I don’t think it
was communicated.
3 It was a shareholder decision to sell.
4 No but, it was based on the shareholder’s feelings
5 The official stance is to make to first truly global beer company and provide more options to customers
6 Not officially
When discussing the reasons for the merger, answers are generally based on financial drivers such as profit and
revenue. Interviewees provided evidence to support growth, synergy and market concentration drivers (Hitt,
Harrison, Ireland, 2001; Morán, Panasian, 2005; Schumann, 1993).
Do you believe that there are other motives behind the merger? 1 In my opinion the reason is profit
2 I would say yes but I have no idea what those would be.
3 N/A
4 There was probably a desire and opportunity to remove a major competitor
5 I feel that it is an attempt to increase market share and revenue
6 It is likely to do with profits and market entry
To ascertain the extent of the impact the merger has had on synergies, culture and business practices
within the companies and compare these findings with literature These guide questions attempt to identify the internal impact of the merger relating to the cultural and human
resources elements identified within the literature review.
Regarding general feelings about the merger, responses were mixed and dependent on the company to which
they were employed but gave evidence to support theories relating to stress, uncertainty and redundancy (Marks,
Mirvis, 2011; Morán, Panasian, 2005; Panchal, Cartwright, 2001; Ribando, Evans, 2015; O’Shaughnessy,
Flanagan, 1998).
How do you feel about the merger between SABMiller and Anheuser-Busch InBev? 1 Worried, about the impact it might have on my job, but also curious about how things will change
2 I have mixed feelings. It could provide new opportunities, it could improve certain aspects which are not
really good in SABMiller but it can also prove to be a company with a hidden agenda or with a not so
pleasant company culture. We’ll see…
3 No particular feelings; it is an opportunity to redesign the way we did the things until now.
4 It will be beneficial as it will allow us to enter markets previously closed to us
5 I think it’s a good thing because it will make for a far stronger brand but I have concerns about how
successful the merger will actually be seeing as many mergers end in failure such as the Daimler and
Chrysler merger
6 I think it will be fine locally and in markets where there is market dominance, it is within regional head
offices that the most change will take place
Discussing job security and redundancies it seems that they are expected on upper levels of management and in
regional head offices due to synergies (O’Shaughnessy, Flanagan, 1998; Morán, Panasian, 2005).
Are there any indications of possible redundancies because of the merger? 1 At this moment, nothing official
2 Absolutely, at least in regional/global structures it’s almost certain there will be redundancies. On local
(country) level not so much but I guess there will be several cases of redundancies.
3 Definitely we will have redundancies as in some countries or in Hub we may have duplicates.
4 There will be some where there is duplicated functions and where some areas are joined and some may be
unwilling to move to a new location
5 Yes some offices are due to be closed to centralise some office functions
6 There will be some in head offices, we won’t need 2 HR departments, 2 purchasing departments or 2
finance department etcetera
Work related issues have been minimal. This is most likely due to the merger only happening recently and
formal integration has not yet occurred. There are expected issues as is typical with mergers but most issues
experienced at this stage are from the lack of focus place by managers on culture, with more preparation for
operational integration. (Marks, Mirvis, 2011; Morán, Panasian, 2005).
Are there any work related issues because of the merger? 1 There were some projects that were stopped, and people were re-assigned to new projects
2 I would say yes. On the IT/systems side I feel there are currently some bottlenecks which I think are
caused by the merger (something along the lines of: is it worth it to invest in fixing this not so critical
issue since in several months to a year we might switch to another system entirely?)
3 We keep the usual routines; just some additional reports.
4 Nothing as of yet, there has been discussion of potentially moving some people to different projects
5 There haven’t been any issues yet but there will be when the two business’ truly become one
6 There haven’t been any yet but when significant change begins there inevitably will be
The extent of planned change is largely unknown with expectations of significant changes (Marks, Mirvis, 2011;
Berry, 1984).
Are there any planned or actual changes to the company culture due to the merger? 1 No, we keep doing things our way, culture is not something that can be changed over night
2 I know nothing on this subject from official sources but probably the AB InBev culture will be taken over
on all ex-SABMiller entities. I know nothing of AB InBev’s company culture though.
A main point of the communication is that until the deal goes through we are still competitors so I don’t
expect any actual changes of this sort until the merger is completed.
3 For the moment everything work as usual; any change in terms of culture, target, behaviour will be
subject after the change of control
4 There have been no changes as of yet but there will probably be elements of culture and business practice
adopted from both sides
5 There haven’t been any changes announced but with any merger there are bound to be some changes,
hopefully they are not too drastic
6 Nothing officially planned as of yet but there has to be someone planning it somewhere
There have been no changes in culture but there is speculation regarding the extent of planning that has
occurred. Some answers relate to acculturation theory (Berry, 1984) while some support SIT (Tajfel, 2010).
If yes, how has culture changed? 1 No change yet
2 For the moment there is no actual or planned changed of company culture, at least nothing has been
communicated.
3 N/A
4 There have been no changes yet
5 There haven’t been any changes but there will be
6 It hasn’t changed yet but I expect there will be, it may not impact local levels. It will start at the top and
work down overtime
The two companies are still operating as separate entities so there been no changes in business practices but
there is conjecture as to the extent of future changes. This suggests Separation acculturation (Nahavandi,
Malekzadeh, 1988) however it is likely to change to Integration.
Have there been any new business practices from the other company introduced into yours? 1 Not yet
2 Not yet. Until the deal goes through we are still competitors.
3 N/A
4 Not yet but there may some in the future
5 No but there will be some such as shared distribution channels and probably the tender and accounting
processes. That will be an interesting few weeks for those who are changing.
6 Not yet. People are probably evaluating the merits of each companies business practices to determine a
course of action
To define the ways that the merger has effected external stakeholders such as customers, competitors
and suppliers in relation to literature Guide questions 9 to 11 aim to determine the mergers external impact of the merger as suggested by Porter
(2008) relating to suppliers, consumers and competitors.
It is largely expected that suppliers will be negatively impacted by the merger due to the company’s increased
buying power (Porter, 2008; Wilkinson, 2013).
How do you think major suppliers will be affected by the merger? 1 They will have to harmonise the commercial terms to the lowest denominator, for some it might mean
some losses.
2 Some suppliers contracted by SABMiller will probably lose some business in favour of competitors
preferred by AB InBev.
Some suppliers contracted by AB InBev will probably face some challenges with the new geographical
coverage; they might not be able to cover all the new countries.
There might also be a big impact in the ways of working with the suppliers if AB InBev has more strict
procedures than SABMiller.
3 We may see an increase of competition on some areas of spend.
4 The new merged company will have considerably more power over suppliers so there will be some
cheaper prices for large purchases such as ingredients and materials
5 Some suppliers may be dropped and some may have larger orders placed depending on their outputs
6 It will allow the company to demand lower prices from suppliers we will be the largest beer producer by a
significant margin so it is to be expected
The expected impact on consumers is varied but it seems unlikely customers will be effected negatively (Fee,
Thomas, 2004; Shahrur, 2005; O’Shaughnessy, Flanagan, 1998), however, business-to-business customers may
suffer (Porter, 2008).
How do you think customers will be affected by the merger? 1 Badly, as less competitors on any market usually impacts product quality and price
2 I don’t have too much visibility on the sales side of the business but probably the ways of working will
change, we’ll have access to a larger beer portfolio so the production and distribution chains will become
a bit more complicated.
3 The customers should not be affected as the primary focus of the business will continue to be selling beer.
4 I doubt the prices will change to drastically. Some brands may be introduced into markets where there
was previously no presence. The business to business sales will likely be more favourable to us because
we would control a third of the worlds beer making it difficult if not impossible for them to make
demands of us
5 There will be more introductions of some brands where it was previously not economical to compete due
to high markets shares such as in South Africa for SABMiller
6 It is unlikely to affect customers particularly negatively because there will be competition on price and its
extremely doubtful there will be changes in product quality. Business customers such as consumers are
likely to lose some power over the new company in terms of exclusivity and product placement in store.
There will be a significant impact on competitors but there are multiple interpretations of type and the severity
of the impact as there are potentially beneficial influences (Schumann, 1993; Eckbo, Betton, Thorburn, 2008)
alongside the negative effects (Porter, 2008; O’Shaughnessy, Flanagan, 1998).
How do you think competitors such as Heineken and Carlsberg will be affected the merger? 1 They will have a very strong competitor, that might dictate market rules in some cases
2 They might be at a disadvantage because of the large beer portfolio the new AB InBev + SABMiller
company can provide to their customers.
3 The new company resulted from merger will play a more significant key role in the market which will
require more efforts and possible new strategies form competitors.
4 The new company will be far stronger than any competitor on a global level but there will be some
competition in local markets. They will most likely experience some difficulties as a result.
5 They will have to find more ways to compete because of the likely economies of scale that the merger
will generate
6 They are likely to experience negative and positive effects. As we demand lower prices for materials they
will be able to as well while they will also have to spend more to compete through marketing as our
marketing budget will effectively double
Stock Price Analysis There are many suggestions as to the impact of a merger on shareholder value, therefore, it is important to
analyse to stock prices of SABMiller and Anheuser -Busch InBev as well as their main competitors to test the
shareholder value theories discussed within the literature review. The SABMiller and Anheuser -Busch InBev
merger was announced in October 2015 which means that it is important to include the share information for
that month and the following month. Also in accordance with Langetieg (1978) study it is important to include
the data from the interval of 6 and 18 months before announcement.
Share prices for SABMiller (GBP)
Figure 1: Share prices for SABMiller (GBP) (Yahoo [i], 2016)
This shows the target firms share price increasing after the merger announcement with increasing value (Jensen,
Ruback, 1983; Jarrell, Brickley, Netter, 1988; Sugiarto, 2000; Coontz, 2004; Langetieg, 1978).
Share prices for Anheuser-Busch InBev (EUR)
Figure 2: Share prices for Anheuser-Busch InBev (EUR) (Yahoo [ii], 2016)
This shows a minor increase of €12.69EUR in share price for the acquiring firm during the announcement
period (Jensen, Ruback, 1983; Jarrell, Brickley, Netter, 1988).
Share prices for primary competitors - Heineken (USD)
Figure 3: Share prices for Heineken (USD) (Yahoo [iii], 2016)
Share prices for primary competitors - Carlsberg (USD)
Figure 4: Share prices for Carlsberg (USD) (Yahoo [iv], 2016)
This shows that the competitors experienced minor fluctuations in share value over the merger announcement
period with Heineken experiencing a decrease in value (Sugiarto, 2000) and Carlsberg experiencing a minor
value increase (Gabszewicz, Thoron, 1991).
SABMiller Stock Price Increase (%) based on Langetieg (1978)
Figure 5: SABMiller Stock Price Increase based on Langetieg (1978)
SABMiller experienced an increase of average share price of 11.74% at 6 months which is similar to what
Langetieg’s (1978) study suggests.
Discussion
To determine whether the drivers behind the Anheuser-Busch InBev-SABMiller merger are as
suggested by theory The literature suggests that the main drivers for mergers are to create competitive advantage through synergy
(Morán, Panasian, 2005), to increase market power (Andrade et al, 2001), tangible such as industry environment
and intangible factors such as stakeholder desires (Yao, Zhou, 2015), industry competition (Nilssen, Sørgard,
1998) and to facilitate growth (Hitt, Harrison, Ireland, 2001).
Interviews suggest that the official reason for the merger was based on the intangible factor of the shareholders
desires (Yao, Zhou, 2015). This is corroborated by Chaudhuri, Raice and Mickle (2015) who found that the
main driving force for SABMiller’s decision to accept Anheuser-Busch InBev’s deal came from its two largest
shareholders Altria Group and Santo Domingo family who combined own 41% of the company’s shares.
Though there is no single officially stated driver behind the merger it is generally accepted that it was a
shareholder decision due to the offer to purchase shares for £44, significantly more than the September valuation
of approximately £29 (Chaudhuri, Raice, Mickle, 2015) making merging highly attractive to SABMiller
shareholders. This explains SABMiller’s desire to merge but not for Anheuser-Busch InBev’s.
Coontz (2004) theorised that the company’s directors are also significant drivers for mergers because many have
stock options and it is in their interest to gain the most value from these. The easiest approach to increase stock
value is through selling them as part of a merger or acquisition. That was definitely the case for SABMiller with
some 1,700 of their senior executive managers benefiting from the sale of shares and stock options worth up to
$2.1bn (Marlow, 2015). This supports the theory that intangible factors such as shareholder desires are major
drivers behind mergers (Yao, Zhou, 2015).
However, employee interviews and analysis of the merger by researchers suggest other drivers. Interviewee
testimony posits that there were financial, competitive and growth reasons for the merger. Interviewees stated
that it was an opportunity for Anheuser-Busch InBev “to remove a major competitor” and allowed for “market
entry” as well as to increase “profit” and “revenue” which are all drivers that literature suggests to be valid
causes for merger activity. These assertions are supported by Jarvis and Buckley (2015) who state that the
reasons for Anheuser-Busch InBev’s interest in merging with SABMiller include projected growth slowdown
over the next five years, to grow in South American beer market and enter the African beer markets where
SABMiller is heavily invested and to become the undisputed global leader within the beer industry.
Literature suggests that mergers are also undertaken because of the need for geographic growth (Hitt, Harrison,
Ireland, 2001). By engaging in merger activity there is potential for market growth and entry into saturated
markets. Anheuser-Busch InBev will be now have access to markets which were previously too costly to enter
or expand, the merger will expand their share in Latin America and North America by 13% and by 15% in
Eastern Europe as well as give them 40% of the African market where they previously had no operations
(Euromonitor, 2015). This illustrates how a driver of mergers is for growth and increasing market power
(Andrade et al, 2001). This market power allows for greater control over customer, suppliers and competitors.
The suggestion that the aim of the merger was to remove a major competitor is understandable because the
merger will bring Anheuser-Busch InBev who owns 20.8% of the global beer market and SABMiller with 9.7%
market share creating a company with 30.5% of the world’s beer market (BBC, 2015) thus removing Anheuser-
Busch InBev’s primary competitor and dwarfing their closest competition who Heineken and Carlsberg who
own 9.1% and 6.1% respectively.
Financial implications are another major reason for mergers to take place. The merger will form one company
with 224,000 employees, producing 783 million hectolitres of beer annually and an annual global revenue of
over $70 billion (Farrell, 2015). This supports the notion that the reason for the merger is based in the
company’s desire to increase revenues because Anheuser-Busch InBev’s (2015) reported annual revenue was
$43,604 million making the merger highly attractive.
The reasons given by interview participants for the merger are supported by multiple theories which aim to
identify the drivers for merger activity discussed in the literature review (Andrade et al, 2001; Nilssen, Sørgard,
1998; Hitt, Harrison, Ireland, 2001). However, some reasons suggested by the literature are not supported in the
case of the Anheuser-Busch InBev SABMiller merger. The idea that synergies are a motivator for mergers
(Morán,Panasian, 2005) is not particularly applicable to this case because global breweries reached their
maximum efficient size in terms of production and distribution 30 years ago (Stockman, 2015) which suggests
that large economies of scale through synergies will not occur for Anheuser-Busch InBev SABMiller.
Therefore, the application of this theory is limited in the scope of the report. Furthermore, suggestion that
mergers are driven by economic shocks put forward by (Yao, Zhou, 2015) is shown to be irrelevant to the
merger decisions of these companies because there is a distinct absence of economic issues within the beer
industry leading up to the merger (Stockman, 2015).
To ascertain the impact the merger has had on synergies, culture and business practices within the
companies and compare these findings with literature The internal impact of mergers is generally related to the human element of business but also includes business
practices and synergies.
Mergers are frequently associated with reduced moral, job satisfaction, productive behaviour in addition to
increased employee turnover and absenteeism, rather than with increased financial performance (Morán,
Panasian, 2005). This is usually caused by high levels of uncertainty within a workplace (Michie, 2002).
Mergers by their nature cause a great deal of uncertainty inside a company because of layoffs (O’Shaughnessy,
Flanagan, 1998) and cost saving measures (Panchal, Cartwright, 2001) as well as during cultural integration
(Berry, 1984; Tajfel, 2010).
Interview respondents from the acquired firm expressed that they were “worried” by the merger and unsure
about the possible impact on company change. While interviewees from Anheuser-Busch InBev felt positive
about the merger stating it will make the company stronger but to expect there to be change they seemed
dismissive about the potential impact on their jobs. The negative outlook of some employees toward the merger
supports elements of Morán and Panasian’s (2005) and Panchal and Cartwright’s (2001) theories. Employees
are likely to experience stress due to perceived changes in cultural identity (Brown, Humphreys, 2003) which
may explain the emotions of worry expressed by interviewees when discussing their feelings about the merger.
In the case of the subject merger, it is likely that employee worries are compounded due the fear of the unknown
impact on culture preventing them from preparing for the change and establishing a new narrative to understand
their position within the company (Ribando, Evans, 2015). Some interview participants approached the question
from a business standpoint rather than a personal one. These were mostly from the acquiring firm who see the
merger as beneficial to them because they feel it will allow for greater opportunities to enter new markets as
supported by Euromonitor (2015). However, there were still concerns raised regarding the viability of the
merger with some pointing to failed mergers in the past. This is a valid concern as Agrawal, Jaffe and
Mandelker (1987) observed that over 50% of US mergers failed to reach the make positive returns, ultimately
ending in failure.
Participants interviewed from both companies expressed an expectation of redundancies believing they will be
caused by synergies created from the removal of duplicate functions generally on the top level. This supports
Morán and Panasian (2005), O’Shaughnessy and Flanagan (1998), Sheen (2013), Fee and Thomas (2004) and
Shahrur (2005) notion that a major internal impact that mergers have is the creation of synergies which leads to
redundancies. Respondents from both the acquiring and acquired companies spoke of the removal of duplicated
functions inevitably leading to layoffs. These are likely to occur on the “regional and global” levels of the
business as some functions become “centralised”. Redundancies have already taken place as a result of the
merger there are £1.4 billion in synergies to be created within 5 years including the closure of SABMiller’s
London headquarters as corporate and regional offices consolidate aiming to create synergies of £500 million by
removing these duplicated functions (Marlow, 2015). The fear of possible redundancies is enlarged by the
reputation of Anheuser-Busch InBev as a cost cutter (Motsoeneng, 2015) which in itself could put the success of
the merger at risk because as mentioned in the literature review post-merger culture management is usually
prioritised lowly as companies concentrate on operational and financial elements (Marks, Mirvis, 2011) even
though Davy et al’s 1988 study found that human resources were responsible for between one-third and half of
all failed mergers. This suggests future difficulties for the company in the future due to a lack of focus on post-
merger integration (Banal-Estañol, Seldeslachts, 2011).
In both companies, participants expressed that there have been minor inconveniences as a consequence of the
merger with many expecting there to be far greater issues as integration progresses. This may signify gradual
change implementation suggesting employment of the integration acculturation method starting with separation
(Nahavandi, Malekzadeh, 1988) where cultural change is slow. However, it is not possible to say this
definitively as there has been no official moves to join the two cultures together as the companies are still in the
initial stages of the merger process.
In regard to culture within the companies, there were very different mentalities observed within the interview
participants. Responses ranged from hostility toward the acquiring firm’s culture, resignation to the fact that
culture will change; unease about the depth of changes to culture, general worry about the impact of the changes
and even a feeling of anticipation towards changes in culture. This suggests that multiple theories identified
within the literature review may be applicable to the Anheuser-Busch InBev-SABMiller merger. Elements of
Tajfel’s SIT (2010) were observed during interviews with in-group originated hostility to the suggested
influence of out-group interference in culture as supported by Marks and Mirvis (2011) findings of this being
particularly prevalent during merger periods. However, early elements of Berry (1984)’s findings can be seen
with the general apprehension of employees towards change suggesting Separation Acculturation. Conversely,
this apprehension can be explained through Maslow’s Hierarchy of Needs (1943) which found that the lack of
self-actualisation can create similar feelings to the ones observed during interviews. During mergers the lack of
self-actualisation is particularly prevalent reducing the applicability of Acculturation theory at this stage of the
merger.
There was no knowledge of official plans to change culture from participants but it is expected and will most
likely start from the upper echelons of the company. Similarly, the company has not officially announced or
recognised frameworks relating to changing business practices but participants expect them to take the form of
synergies. Furthermore, the two companies will terminate some distribution methods to maximise distribution
available to each company (Monllos, 2015), coupled with amalgamation of some brewing facilities and changes
to distributor selection (Marlow, 2015). These changes in business practice are believed to provide significant
cost savings but also a serious impact on the role of many employees.
To define the ways that the merger has effected external stakeholders such as customers, competitors
and suppliers in relation to literature
Suppliers When discussing suppliers, SABMiller employees stated that they expect cases of nepotism to take place when
determining which suppliers to retain. This would fit with Tajfel’s SIT (2010) because it suggests that there will
be cases of group based prejudices when determining strategy.
Others anticipated supplier costs would reduce due to multiple reasons. One of these is through generating
synergies by eliminating some suppliers and “harmonising” or removing duplicate suppliers to reduce price.
This is supported by some elements of the literature such as Sheen (2013) who suggested that merging would
allow for some business functions to be condensed leading to lower costs as well as dropping some smaller
suppliers to take advantage of economies of scale generated by having increased production levels
(Morán,Panasian, 2005). A further reason given by participants for reducing supplier costs is from the company
having far greater purchasing power over suppliers allowing them to demand lower prices (Porter, 2008) and
Andrade et al (2001). These assertions and theories are highly applicable to this case because by controlling of
the largest share of global beer production by a significant margin, the ingredient producers have far less ability
to demand higher prices from the company (Monllos, 2015). Wilkinson (2013) statements regarding the power
of suppliers in markets of high concentration is supported in the case of Anheuser-Busch InBev-SABMiller and
the beer industry as there are far more suppliers for materials required than there are large scale beer producers
in the market (Nosowitz, 2015).
Respondents also anticipated that it may be difficult for suppliers to become familiar with new business
practices utilised by the company. This would incorporate the business practices elements of Panchal and
Cartwright (2001) who found that differences in business practices can lead to efficiency issues due to resistance
to change. Some smaller suppliers may be resistant to changing their business practices however this will be of
greater detriment to the supplier than the manufacturer.
Customers Interviewees took questions relating customers as the business-to-business customers and end-user customers.
When discussing customers from the end-user viewpoint opinions on the mergers impact were mixed. Some
believed that the reduction in barriers to entry for in some markets such as for Anheuser-Busch InBev in the
South African market would be beneficial as there would be greater choice which is contradictory to Porter
(2008) who believed choice would be reduced. However, it is likely that there would only be an increase in
choice for Anheuser-Busch InBev-SABMiller brands while limiting the choice of other brands (Udland, 2015).
Other participants believed that the merger will have no effect on the end-user as the company’s primary focus
would continue to be beer, price is unlikely to change and the products quality is not something that can be
influenced easily without losing customers. This is supported by Fee and Thomas (2004) and Shahrur (2005)
who found that with mergers such as the subject of this project it is the supplier that is used to increase
profitability rather than the customer making mergers beneficial to consumers. This directly opposes Porter’s
(2008) view that by reducing the number of competitors, prices and quality are likely to drop which one
participant believes to be the case for most markets.
In relation to business customers such as supermarkets and pubs, interviewees believe that the merger will have
a negative effect on them because their power over the companies as individuals is greater than what they have
over the merged company. This supports Porter (2008) assertions of the effect of reducing the buying power of
suppliers through market concentration.
Competitors It is the consensus of all interviewees that the merger will have a detrimental effect on the company’s
competitors. The reasons given were: a much larger product portfolio, far greater market share and revenues, be
required to engage in greater competition, the new company will be able to dictate market rules, the new
company will have greater profit margins due to economies of scale which would increase their ability to
compete on price and have to compete far more in terms of marketing. These predictions support Porter’s (2008)
statements regarding the power of competitors in a market including one much larger company. Schumann
(1993) found that after a market experiences a largescale merger there is a rapid increase in competition because
of the synergies and economies of scale gained by the merged firm.
However, it is also possible for competitors to demand lower prices for materials because a consolidated market
reduces the power of suppliers. Furthermore, according to Eckbo, Betton and Thorburn (2008) markets with
collusive and monopolistic mergers the product price generally increases. This can increase the profit margins of
Anheuser-Busch InBev and SABMiller without the need for capital intensive methods such as mergers; this is
further supported by theory from Schumann (1993) who found that in market with one far larger company and
many smaller ones the average product price increases.
Bart Watson, Chairman of the Brewers Association, suggests that the merger will be a trigger for more within
the beer market as companies strive to compete (Monllos, 2015). This assumption is supported by Yao and Zhou
(2015) who state that merger waves are triggered by economy factors such as in response to competitor actions
in this case a large merger (Udland, 2015). The Anheuser-Busch InBev-SABMiller merger is also likely to
trigger mergers in the craft beer market (Monllos, 2015) because the merger will allow Anheuser-Busch InBev
to regain the growth that they lost to craft beer in North America by entering the high growth African market
through SABMiller. This supports theory identified in the literature review.
Shareholders The literature suggests that price will highly influenced by a merger. Jensen and Ruback (1983) and Jarrell,
Brickley, Netter (1988) concluded that mergers produce value for stockholders of the merging firms, with the
bulk of the gains being acquired by the stockholders of the target of acquisition. SABMiller share value
increased £131.72GBP during the announcement period while Anheuser-Busch InBev shares increased by only
€12.69EUR meaning SABMiller shareholders received the greatest benefit. Furthermore, SABMiller
experienced an increase of average share price of 11.74% from 6 months before the announcement while
Langetieg’s 1978 study predicts and average of a 12.9%. This is within an acceptable margin of error because
Langetieg’s theory is built from analysing 614 mergers.
Conclusions
The literature suggests that the Anheuser-Busch InBev SABMiller merger is driven by the desire to increase
market power, for growth, by shareholder desires or by economic shocks. From the investigation it has been
determined that Anheuser-Busch InBev proposed the merger to increase their market share, create growth and
remove competition and accepted by SABMiller because of stockholder desires. The merger was driven by
elements from many theories suggesting that literature in this area is simplistic because it purports that mergers
are caused by one driver. Some aspects of literature were not applicable to the case because there were no
economic shocks leading to the merger; however, it is found that this merger will create an economic shock
conducive to subsequent merger activity between competitors.
The theories regarding internal impacts of merger activity such as synergy, culture change and post-merger
culture management were shown to be pertinent to the case of Anheuser-Busch InBev SABMiller giving them
credence.
Externally, the merger impacted external stakeholders differently. Suppliers are likely to be adversely effected
as synergies are made and supply systems are harmonised as predicted by literature. Business-to-business
customers are likely to be negatively impacted by the merger due to their market power being reduced while
end-user customers are likely to benefit from lower prices. The merger has had a mixed impact on competitors.
However, the merger is also likely to reduce the prices of raw materials required in the brewing process because
supplier power has been diminished.
By undertaking this research flaws in established theory have been identified because most theory is related to
general effects of mergers for the analysis of many mergers in unrelated industry or is focused on only one
element of mergers from analysing this one area in a wide variety of mergers. This illustrates the usefulness of
this type of research to build an in-depth understanding of mergers because they have a multifaceted impact on
the company, the industry and customers that is unique in each case.
It would be useful to reanalyse the Anheuser-Busch InBev-SABMiller merger against literature in the future
because some elements of literature cannot be fully tested due to the recent nature of the subject. By conducting
the research again in the future, researchers will be able to gain a more detailed and accurate understanding of
the drivers and impacts of merger activities on case study companies and their industries.
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Appendix A – The guide questions for the semi structured interviews
1) How do you feel about the merger between SABMiller and Anheuser-Busch InBev?
2) Are there any indications of possible redundancies because of the merger?
3) Are there any work related issues because of the merger?
4) Are there any planned or actual changes to the company culture due to the merger?
5) If yes, how has culture changed?
6) Have there been any new business practices from the other company introduced into yours?
7) Have you been told the reasons for the merger?
8) Do you believe that there are other motives behind the merger?
9) How do you think major suppliers will be affected by the merger?
10) How do you think customers will be affected by the merger?
11) How do you think competitors such as Heineken and Carlsberg will be affected the merger?