Circumstances that led to Budweiser buyout
Budweiser opted for a buyout because it was facing a long-term sales decline in the United States market. Consumers begun to develop thirst for wines and spirits and imported beers and this resultantly dented the desire for products that were manufactured by Budweiser.
Another reason that fueled the buyout of Budweiser was the 2008 global financial recession that triggered sharper recoil within the American beer market. Other than the problems attributed to recession, Budweiser was lured by InBev’s way of doing business where they dramatically cut costs and consequently accrued 52 billion dollars that enabled it to buy Anheuser-Busch (BBC, 2008).
How it improved their position
The Budweiser buyout stood to improve their position because the combined businesses stood to accrue annual sales of 36.4 billion dollars. InBev also offered to pay 70 dollars for each share. The buyout put positioned Budweiser to have a variety of brands like Beck’s and other beverages under one roof.
The buyout put the merged companies to achieve more than they were able to achieve when they were operating individually because a stronger and more competitive global company would spring up with a brand portfolio that is accepted worldwide and which could withstand competition.
They would have a stable distribution network. Nevertheless, they stood to have great growth potential all over the world. The merger and buyout was advantageous to Budweiser as it enhanced its global market access as evidenced in their resolve to expand into Russia after the merger.
Major changes and if they are better off
The buy-out of Budweiser is laudable because the $70 synergy was a reasonable price. The deal also did away with protracted court battles that would have ensued on the part of InBev.
Because of the rapid consolidation that has of late characterized the beer market occasioned by cost pressures and declining sales, it was only practical that Budweiser embraces the buyout option to cope up with changes in the mature market it was operating in.
For purposes of breaking even, it was important that Budweiser consider a buyout in the same way the Scottish & Newcastle company was bought out by Heineken and Carlsberg. Despite the fact that many people have raised eyebrows on the Budweiser buyout, the company stood to benefit from growth in Europe where its market presence has been waning despite being a household brand in the UK.
Concerns that the buyout stood to fuel job losses in the United States, whose economy had already been affected by recession, were not supported by facts because the two firms assured their employees that job losses were to be kept at a minimum. Finally, the buyout was worth considering bearing the fact that annual savings of 1.5 billion dollars would be generated by these two firms.
As a result of the buyout, Budweiser stands to regain the United States market share because of the efforts that are being made towards improving execution and reconnecting with wholesalers’ as evidenced by the 48 per cent share of American market it is currently holding. The merged companies’ resolve to step up efforts to increase their brands’ international presence is a positive step towards increasing their sales turn over. Their stability in the United States market is sign of god things to come.
Reference
BBC. (2008). Stella firm buys Budweiser brewer. BBC News. Web.