; 1,800 words)
On November 11th 2015 Anheuser-Busch InBev (Belgium/Brazil Brewer) announced its intention to formally offer to acquire SABMiller (South African/American Brewer) in a £71bn deal. The potential deal had been extensively discussed in the press for months leading up-to this announcement. Due to the size, scale and the number of markets both companies are involved in, the acquisition (dubbed “Megabrew” by financial writers), had by May 20th 2016 (six months later) only just cleared European Commission regulatory approval. Further regulatory challenges based on market share and market power concerns still had at that point to be resolved.
In an academic essay format, you are to consider the AB InBev acquisition of SABMiller. A Financial Times “clippings list” of a number of newspaper articles, and links to Financial Times video analysis regarding the acquisition can be found below to support students:
You are expected to use these articles and videos as the starting point in your wider investigation and research into the deal. You should be using further resources beyond this initial starting point.
Specifically, you are to choose two of the following three tasks (25 marks each) and write a single integrated academic essay which addresses both of the tasks selected.
1. You are required to critically discuss the impact of cost of capital & capital structure on the ability of companies to generate acceptable returns for shareholders. Your answer should display a thorough and extensive engagement with appropriate academic literature and come to an informed judgement regarding the ability of managers to adjust their capital structures to generate higher returns for shareholders both generally (i.e. for all companies) and specifically for AB InBev’s acquisition of SABMiller.
2. You are required to critically evaluate the literature regarding the success or failure of merger and acquisition activity and conclude with an informed judgement as to whether the evidence would suggest that shareholders should welcome or be wary of M&A activity generally (i.e. for all companies), and specifically for AB InBev’s acquisition of SABMiller.
3. You are required to come to a judgement regarding the ability of investors to judge the value of their equity share investments when investing in the stock market. Your answer should specifically show an engagement with the academic literature regarding both the efficiency of the stock market and share valuation. Your answer should conclude with recommendations as to how holders of SABMiller’s shares should have valued those assets at the point of announcement of AB InBev’s formal bid (11/11/2015).