You are on page 1of 3

A

1. The CAGR of beer market between 2014 and 2019 is .52% whereas the CAGR
for wine is 4.09% and for spirits is 6.18%. And the market share of beer has
decreased from 55.1% in 2014 to 49% in 2019.
2. Tbd
3. The CAGR of craft beer is 7.63% whereas the CAGR of wine and spirits are
4.09% and 6.18% respectively. Also the operating margin is 20% for the craft
beer which is high compared with other beverages like spirits, and other
types of beer. For Wine the margin is high but the competition is medium and
investments needed is high whereas for craft beer the competition is low and
investments needed is medium.Hence it appears as attractive segment
B
1. Where does beerco fit in the long term plans of bevco, competition in the
segment in which beerco operates, Would beerco be marketed under the
bevco brand after acquisition, organization fit, corporate culture, Market
conditions, consumer preferences, market size. BevCo should evaluate what
is the ,
Existing cash flow (sufficient to pay expenses and make a living)
Government regulations
Financial records and representations by seller
Remember to take care of the most important asset: people
2. Potential Revenue & Cost Synergies
Increased market power: increases profit margins and sales
Potential sources of cost synergies include:
- Headcount reduction (redundancies)
- Elimination of surplus facilities
- Reduced overheads (e.g. consolidate functions such as accounting, IT and marketing)
- Increased purchasing power (greater bargaining power with suppliers due to greater
combined size)
Revenue synergies
Revenue synergies refer to the ability to sell more products/services or raise pricesdue
to the deal.
Potential revenue synergies include:
- Marketing and selling complementary products
- Cross-selling into a new customer base
- Sharing distribution channels
- Access to new markets (e.g. through existing expertise of the takeover target)
- Reduced competition
3. 28.8%
C

1. Operating margin of BeerCo in 2014 is 21.6% . It is higher than average


operating margin (20%) of the craft beer segment
2. Produce cans
3. Tbd
D
1. The valuation methods are:a. Discounted cash flow analysis
Pros:- It relies on actual and projected cash flows and determines the
intrinsic value of the company
Cons:- The discount rate used in the calculation has lot of assumptions.
A small variation in the discount rate can change the intrinsic value by
a large amount. Also it requires forecasting of future cash flows which
is very subjective
b. Comparable company analysis
Pros:- The trading value serve as a good indicator of the value of the
company if we assume that markets are efficient
Cons:- Finding a comparable company is very difficult , no two
companies are exactly alike. Also if a company is not traded frequently
the price might not reflect the fundamental value of the company
c. Comparable transaction analysis
Pros:- Since a transaction has already occurred , it validates the
valuation . Also it is easy to use
Cons:- The transaction generally contains control premium or synergy
assumptions which are transaction specific and might not be relevant
for other companies using this data. Also the time of transaction
influences the transaction valuation and hence might not fully reflect
the true fundamental value
For Beer comparable transaction valuation technique is more suitable
since we already have the transaction data of comparable companies
in craft beer segment.
2. USD 11465.5 million
3. Beyond synergies, if the acquisition would result in increased market power
or gain access to unique capabilities of the target company like intellectual
capital , R&D, etc
E
1. Tbd
2. BevCo should open a new production facility.
Supplier
Year
Cans
Total cost

2014
500
75

2015
700
105

2016
900
135

2017
1100
165

Own
production
Year
Cans
variable
cost
fixed cost
total cost
3.

2014
500

2015
700

2016
900

2017
1100

25
100
125

35
25
60

45
25
70

55
50
105

You might also like