We choose the company Pernod Ricard because it is one of the world's leading companies in the production of wines and premium spirits. This company has now become bigger since the old rivals Pernod and Ricard have merged to form Pernod Ricard SA. Through subsequent acquisitions, Pernod Ricard acquired the status of a worldwide conglomerate and earned second place, behind the leader of this market, the British Diageo. The main purchases or mergers/acquisitions took place in 1988 (Irish distillers), in 2001 (Seagram), and in 2005 (Allied Domecq). Business intelligence has played a big role in each decision made by Pernod Ricard. However, for every action on the wines and spirits market, the French firm needs to master and protect all the strategic information which can allow it to avoid mistakes, competitive, its own structure, penetrate the American market with Vodka, and maybe become number 1.
In order to deal with our key topic, we studied the key problems and the key questions of the new acquisition in detail, as it represents another step in the development of the French drinks giant. Through a competitive assessment, we will evaluate how Pernod Ricard makes its strategic decisions, and how the company acts. This topic shows the importance and the necessity of acquisitions for a lot of companies, in a long term vision strategy. Thus the competitive aspect in the activity of takeovers, mergers and acquisitions is emphasized.
[...] As an introduction of the analysis of the merger of Pernod Ricard and Absolut Vodka, a definition of a merger seems to be necessary. A merger is a combination of two corporations in which only one corporation survives, and the merged corporation goes out of existence. In a merger, the acquiring company assumes the assets and liabilities of the merged company. This business transaction is sometimes called statutory merger” which is different from a subsidiary merger, which is a merger of two companies in which the target company becomes a subsidiary or part of a subsidiary of the parent company. [...]
[...] -How can Pernod Ricard reinforce its position in USA with the acquisition of Absolut Vodka whereas Diageo positioned itself number one and Bacardi number Pernod Ricard has to develop and accelerate its strengths on the market for Vodka. The group needs to organize the distribution of its new brand through the existing networks (of the acquired firm or of the one which acquires), but this represents a new challenge that also can be an advantage for the biggest competitor Diageo; in case of failure. [...]
[...] Indeed, Pernod Ricard has to collect and analyze information to make the right decisions faster and to try to anticipate the predictable “surprises” (change of trends of consumption, new trends of promotion etc.) Pernod Ricard did not own a brand of Vodka in its range of products. The company was not able to remain really competitive on this growing market. The competition is now harder because of the British competitor Diageo, which is leader in buoyant markets such as the North American one, with its product Smirnoff Vodka (the most sold in the world). [...]
[...] Today, Pernod Ricard represents a big French group which has successfully built an empire of alcoholic beverages, with a never-ending growth. This year, Pernod Ricard decided to acquire a new company: Absolut Vodka, a brand of the Vin and Spirit group which belongs to the Swedish government. Founded in 1917, this group was very successful in North America, particularly with their Vodka (which was distributed by a Pernod Ricard's competitor, Fortune Brands, until the acquisition). Is this new acquisition a good option for Pernod Ricard? How will this decision have to be made? [...]
[...] Most commonly used valuation methods Pernod Ricard may use several methods of valuing businesses. Some are used more for certain valuation exercises, while in other circumstances other methods are used. For the sake of completeness, we will review each method but point out those that are most relevant to valuing public companies for acquisitions: - Discounted future earnings and cash flows. - Comparables multiples - Capitalization of earnings - Asset oriented approaches - Industry specific approaches Growth rate used, valuation and hidden costs The growth rate is a key assumption. [...]
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