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?