1. Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision
• Relatively inelastic
demand for wine , spirit
and beers
• Market fragmentation-
Easy to develop Brand
loyalty
Strengths Weakness
ThreatsOpportunities
• Well established
multinational supply
chain
• Established brand in
wine & spirits
industry
• Experience in cross-
cultural integration
• No experience in
Beer market
• Small brewers-Producing
quality products and
capturing market share
• Large brewers-
Developing their own
Premium beers and
capturing market share
• Changing customer taste
SWOT analysis of BevCo.
Change in customer taste
Increased Market
shareAcquisition of BeerCo.
BevCo.
• BevCo. is a leading International producer and
marketer of Wine & Spirits with operations in
USA , Canada , Mexico & Italy.
• Has 100 brands in its portfolio , sales in
approximate 100 countries , about 40 facilities
and approximately 6300 employees.
Revenue & Profitability
• Recently BevCo. Has been facing declining
revenue & profitability due to shifts in
consumer tastes to other categories , such as
beer.
• Also there is a high competition in Beer
market from other brewers.
BeerCo.
• One of the way to bolster growth is to enter
the Beer market , to diversify revenue streams
and broaden its portfolio of brands.
• BeerCo. is a potential acquisition target .
BeerCo has a selling & distribution solely in the
United states.

2. US Beer market segmentation
Segment
Revenue in Million
USD
Average annual
growth rate %
2014 2019 (E)
Super Premium 2035.2 2162.4 6.3
Craft 3434.4 4960.8 44.4
Import 6455.4 7294.92 13.0
Premium 8115.36 7584.3 -6.5
Sub Premium 12589.62 11479.8 -8.8
Total Beer Market 32629.98 33482.22 2.6
BEER
Expected US Alcoholic Beverage market in 2019
Super
Premium
Craft
Import
Premium
Sub
Premium
Beer Market Segmentation
-20% -10% 0% 10% 20% 30% 40% 50%
Super Premium
Craft
Import
Premium
Sub Premium
Average Annual growth rate of Beer segments
59.2
60.2
63
65
66.5
68.30
54
56
58
60
62
64
66
68
70
2014 2015 2016 2017 2018 2019
BillionUSD
Year
US Alcoholic Beverage Market In $Billion
High
Growth
Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision
values in Billion USD
2014 2019 (Exp) CAGR(%)
Alcohol beverage industry 59.2 68.3 2.901
Wines 9.5 11.611 4.095
Spirits 17.2 23.222 6.186
Beer 32.6 33.428 0.498
Segment-wise Growth Rate of US Beverage industry

3. Company Financials in 2014($)
In Billions of USD BeerCo
Revenue 1.11B
COGS 669M
SG&A 201M
EBITDA 260M
Operating Income 235M
Operating Margin % 21.17%
Industry Craft Beer operating margin 20%
Financial Information Breakdown All numbers in Millions (USD)
Financial Information
Lager Ale Stout
2013 2014 2015 2013 2014 2015 2013 2014 2015
Revenue 625 719 863 208 228 262 150 158 173
COGS 400 460 552 113 124 138 81 85 94
SG&A 125 150 195 30 30 33 23 21 23
Operating Income 100 109 116 65 75 92 46 51 57
Operating Margin% 16% 15% 13% 31% 33% 35% 31% 32% 33%
 Lager has higher Revenue Growth compared to Ale and Stout
BUT
100
300
500
700
900
1100
1300
2015 2016 2017
RevenueinMillions(USD)
Year Revenue Growth
Lager
Ale
Stout 0%
5%
10%
15%
20%
25%
30%
35%
40%
2013 2014 2015
Operatingmargin
Year
Operating margin
Lager
Ale
Stout
 Ale would prove to be profitable in the long run due to growing operating margin.
Revenue growth needs to be improved with Higher Marketing and Cross selling
Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision

4. Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision
1
2
3
4
1
2
3
4
2014
1
2
3
4
2019
Low market share
& Low growth
Low market share
& High growth
High market
share &
growth
BeerCo acquisition proposal is based on the following factors-
Growth Synergy
Customer
Taste
•To address shifting customer tastes in US market towards craft brews and imports, BevCo should look towards expanding into the Beer market.
Small
brewers
•Small brewers are focusing on quality to capture market shares, taking advantage of the fragmented markets compared to last decade
• This could be countered by increasing the marketing and cross-selling between BevCo and BeerCo customers.
Large
brewers
•Since large brewers could make premium brands and try to retain market shares, BeerCo acquisition would woo their customers using existing Craft brews and Premium Beer segment of BeerCo
Customer
Loyalty
•Since market is fragmented and a rise in income is making people conscious of Brand, acquiring BeerCo with existing supply chain and customer base and marketing it heavily would lead to better brand
consciousness.
SOURCE: BCG Matrix

5. Based on Comparable Transaction analysis of Beer and craft Beer based
acquisitions, we establish a price range from $1887 million to $7215 million.
Which further validates the DCF pricing
Based on Discounted Cash Flow (DCF), Acquisition price: $4223.06 Million (Excluding Synergy cost)
Discounted Cash Flow
Analysis-
The future cash flows are
discounted at the treasury bill
rates to calculate the Net
Present Value and then
discounted at the present cost of
capital.
Pros: Revenue based so gives
precise market capture potential
Cons: T-Bill rate may vary and
may lead to inconsistency.
Comparable transaction method-
Acquisitions in the similar industry are
scrutinized and based on the Acquisition
to Revenue multiple or Acquisition to
EBITDA multiple ,the target company is
valued.
Pros: Reflects on market fluctuations
Cons: Hidden costs and transaction
using shares may not always disclose
the true value of the company
Multiples method-
The profitability ratios are
used for valuation , for
example P/E ratio.
Pros: Gives adequate
information on company
financials
Cons: The hidden costs
and auditing negligence
may result in error
e.g.: Satyam case
Market valuation method-
Demand and supply
equilibrium established and
valued accordingly.
Pros: Gauges exact demand
and supply dynamics of
market.
Cons: It would not work in
certain markets like monopoly
or in case of cartel formation
Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision
Company Financials in
2014($ Millions) BevCo
BeerC
o
Synery
Benefits
Revenue 3350 1110 4683
COGS 2180 669 2564.1
SG&A 652.6 201 768.24
Operating
Income 517.4 235 1350.66
Operating
Synergy Based
operating margin
Factors Affecting Price other than Synergy
Market Saturation
Low cost base due to asset depreciation
Efficient manufacturing facilities of target
company
Established Supply Chain
Demand for the product line

6. 0
50
100
150
200
250
2013 2014 2015 2016 2017 2018 2019 2020 2021
SupplyCostin$USDinMillions
Demand of cans in millions
Production facility vs Supply Costs
Supplier cost
Supply through
Production facility
BREAK-EVEN POINT
Production Facility Feasibility Study
Assumptions:
•Every expansion is finished & facility is operational within six months.
•The deficit in facility capacity, would be met by taking supply of cans
from supplier.
•The supplier prices per unit and the variable costs per unit remain same
across the time period.
Based on the Break-even point the facility for production
should be installed right away so that it becomes
profitable by 2015
Operational Considerations before acquiring BeerCo
Executive summary Market Analysis Acquisition strategy Acquisition valuation
Supply Modification
Decision
Established Customer Base:
BeerCo is larger by revenues compared to the
recent acquisitions.
Which implies it has a prominent customer base
accounting for additional market share for BevCo
Established Supply Chain:
BeerCo has established Supply chain in US markets.
BevCo would have a choice for continuing, modifying or
creating redundancy.
Synergistic benefits: Growth Synergy means entering
into a larger market share.
Beer Segment of the market is greater than the Wine
and Spirits market with increasing popularities of Craft
brews and imports
Low Operational costs of BeerCo:
BeerCo has higher operating margins compared to
industry.
Which speaks of the efficiency in operations and supply
chain management.
Market Demand Inelasticity:
Relatively inelastic market demand means it can absorb
any sudden price offsets due to inexperience of BeerCo
operations by the BevCo management
Change management:
People need to be told about change in management
else we may face irrational layoff fears from
employees or decrease in productivity.
Cultural indifference:
The work culture differs from organization to
organization and may hamper team work and
communication flow across organization.
Return On investment:
Your profitable the growth synergy would be based on
the synergy benefits forecasted by market research and
how quickly would it start giving return on capital
invested.
Lower Overall Beer market:
Compared to wine and spirits market, beer market has a
lower CAGR which means it would depend on few Beer
segments to capitalize on the invested capital
Approval from Federal Trade Commission(FTC) &
existing stakeholders:
Rationalizing the decision to acquire should be
explained to the shareholders.
In case acquisition fails due to FTC interruptions the
reputation of the BevCo CEO would have to suffer

7. US Beer market segmentation
Segment
Sales
volume(Barrels in
millions)
Average price per
bottle($)
Revenue in Million USD
Average annual growth rate %
2014 2019 (E) 2014 2019 (E) 2014 2019 (E)
Super Premium 10 10 0.64 0.68 =0.64*318*10 =0.68*318*10 =((2162.4-2035.2)/2035.2)*100
Craft 9 12 1.2 1.3 =1.2*318*9 =1.3*318*12 =((4960-3434.4)/3434.4)*100
Import 29 31 0.7 0.74 =0.7*318*29 =0.74*318*31 =((7294.92-6455.4)/6455.4)*100
Premium 58 53 0.44 0.45 =0.44*318*58 =0.45*318*53 =((7584.3-8115.36)/8155.36)*100
Sub Premium 107 95 0.37 0.38 =0.37*318*107 =0.38*318*95 =((11479.8-12589.62)/12589.62)*100
Total 32629.98 33482.22 =((33482.22-32629.98)/32629.98)*100Assuming, given are the only segments in Beer market
Appendix1-US Beer Market & Craft Beer growth calculation

8. Where
Xt = The nth year revenues
Xt-n = The base year revenues
n = number of years
CAGR= compound annual growth rate
Assumptions: Given 2.9% as the CAGR we calculate the 2019 revenues
In $Billion 2014 2019 (E) CAGR (%)
Alcohol beverage industry 59.2 68.3 =(((68.3/59.2)^(1/5))-1)*100
Wines 9.5 =0.17*68.3 =(((11.611/9.5)^(1/5))-1)*100
Spirits 17.2 =0.34*68.3 =(((23.22/17.2)^(1/5))-1)*100
Beer 32.6 33.428 =(33.42/32.6)^(1/5)-1 *100
Appendix2-US Alcoholic beverage market revenues
𝑪𝑨𝑮𝑹 = (
𝑿𝐭
𝑿𝒕−𝒏
)
𝟏
𝒏-1

9. Company Financials in 2014($ Millions) BevCo BeerCo Total Synery Benefits
Revenue 3350 1110 =3350+1110 =1.05*L14
COGS 2180 669 =2180+669 =0.9*L15
SG&A 652.6 201 =652.6+201 =0.9*853.6
Operating Income 517.4 235 =4460-2849-853.6 =4683-2564.1-768.24
Operating Margin % 0.154 =235/1110 =757.4/4460 =1350/4683
Assumptions: 5% Revenue Growth
10% Total Cost Reduction
Company Financials in 2014($
Millions) Synery Benefits BevCo + BeerCo Discounted at Cost of capital Value of Synergy
Revenue 4683 4407.83 275.17
Appendix3- Calculation of Synergy Benefits

10. Revenue Growth calculation
2015 2016 2017
Lager 863 =1.22*863 =1.23*1052.86
Ale 262 =1.1*262 =1.05*288.2
Stout 173 =1.08*173 =1.07*186.84
Revenue in %
2013 2014 2015 2016 2017
Lager 15 20 22 23 25
Ale 10 15 10 5 5
Stout 5 10 8 7 5
Appendix4-Revenue growth calculation

11. Appendix5-Valuation Calculation
Revenue Growth calculation $USD Millions
2015 2016 2017
Lager 863 1052.86 1295.0178
Ale 262 288.2 302.61
Stout 173 186.84 199.9188
TOTAL 1298 1527.9 1797.5466
Discounting future revenues at T-Bill rate 2.04%
2015 2016 2017
1298 1527.9 1797.5466
NPV 4431.345899
NPV discounted at the cost of capital 4.70%
Proposed Acquisition Price 4223.072642
BeerCo acquisition price based on
Target Segment Target Transac multiple Target EBITDA multiple Revenue multiple EBITDA
Craft Beer 1.9 12.3 2109 3198
Beer 6.5 25.9 7215 6734
Beer 1.7 8.7 1887 2262
Craft Beer 1.7 10.4 1887 2704

12. ($/unit) Figures in Millions 2014 2015 2016 2017 2018 2019 2020 2021
Supply 500 700 900 1100 1300 1500 1700 1900
Supply Production facility 500 625 750 875 1000 1125 1250 1375
Deficit in production 0 75 150 225 300 375 450 525
0.15Cost of Supply from supplier 75 105 135 165 195 225 255 285
0.05
Cost of Supply from production
facility 125 67.5 85 102.5 120 137.5 155 172.5
Fixed Cost 100 25 25 25 25 25 25 25
Appendix6-Supply Calculation