Post-merger Value Creation: the Case of AB InBev and SAB Miller

Razvan Mititelu

Student thesis: Master thesis


The main objective of the following paper is to determine whether the merger of AB InBev with SAB Miller will create value.
Historically the companies represented the largest and the second largest beer producer in the world. They merged during late 2016 when 3G Capital, the main shareholder of AB InBev and the team behind its management team acquired SAB Miller through a friendly takeover. 3G Capital is a private equity company, known for its big-ticket acquisitions and for their way of slashing costs.
The papers starts with presenting in a descriptive matter the three parties involved. The following section starts the analytical side of the thesis through the restatement of the financial statements for the two companies in order to separate the operating activities from the financing ones. The forecast of the two companies is performed through a pro forma method. A financial model will be designed rather than static financial statements, in order to be able to apply different adjustments on some of the Income Statement and Balance Sheet items. The impact of these adjustments will be able to be measured only through a financial model.
The next section presents both qualitatively and quantitatively how 3G Capital usually applies their integration plan after the merger in order to obtain synergies. To forecast which synergies will be obtained and what will be their value, we will be looking at two comparisons: firstly against previous 3G deals including AB InBev and Kraft Heinz and secondly against peer companies in the industry such as Heineken and Carlsberg. The main synergies will be in the areas of Cost of Goods Sold, Selling, General and Administrative expenses and Accounts Payable Management. The value of these synergies will be taken then into account in the financial model in order to obtain the consolidated financial statements of the combined company.
Based on the financial statements of the merged company we will assess and measure the value creation. Firstly, through Return on Invested Capital and and Economic Value Added. Both measure will indicate that value is created, however not at the full potential. Cost synergies have a limited effect on the value creation and thus revenue growth synergies have to be introduced in order to maximize the potential. Revenue growth has a tremendous impact on value creation and will represent the success factor behind this merger. In the end section, we look at the value creation from a cash perspective and determine that the value of the combined company exceeds the market value of the two companies before the merger plus the acquisition premium. Thus, the thesis concludes that 3G Capital will be able to create value through the merger of AB InBev with SAB Miller.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2017
Number of pages102