InBev was motivated to acquire the American icon Anheuer Busch to capture dominant market share in one of the largest and fastest growing beer markets in the world. The acquisition also promised substantial cost savings by enabling InBev to realize significantly larger purchasing discounts. However, InBev downplayed the potential for cost savings to defuse local criticism of the move by noting that the acquisition would be highly complementary in broadening the combined firms’ product offering. Presumably, InBev will be able to increase the sales of its brands by selling such beers through Anheuser Busch’s vast distribution network.
The acquisition of Anheuser-Busch by InBev can be defined as a horizontal merger. This is a merger by companies that sell the same products. “Horizontal mergers often characterizes industries and markets whose products are genereally in the mature or declining stages of the product life cycle. The overall growth rate of these markets is low, and firms have built up production capacity that far exceeds the demand. This combination of low market growth and excess capacity places pressure on firms to achieve cost efficiences through consolidating mergers.” The value for this type of merger lies in the increased market power, market share and network externality, revenue enhancement and/or cost reduction and pursuing new growth opportunities.
Following that the plans of InBev were driven by a general trend of industry consolidation, the declining beer consumption in traditional markets and the geographic fit between both firms.
Market circumstances: Because of the declining of beer consumption and the need to secure t heir future structural InBev had to look for growth also by acquisition. And with Anheuser-Busch (hereafter called: AB) there was a superb geographic fit. The U.S. market was new for InBev and AB was the dominant brewer in this market. This made AB an interesting target for InBev. Such a deal will be subject to...