Further, cost synergies of $1.5 billion annually are expected to accrue (Anheuser-Busch, 2008). These claims are reasonable. There is little geographical overlap between the different brands. In particular in China, A-B is strong in the northeast, while InBev is strong in the southeast. The two companies are also complementary, with A-B strong in North America and InBev strong in Europe and South America. The experience of InBev in its previous major move in North America (the acquisition of Labatt's in Canada) was that it was able to build market share for InBev global brands by using the existing Canadian distribution system. Therefore, their expectation of replicating this success in the U.S. is reasonable. The claim of cost synergies is, however, questionable. While InBev claims a strong track record of cost synergies, previous M&A activity was largely in takeovers. A merger of equals leaves the company with two systems operating worldwide. There are no plans to rationalize capacity in North America. Cost savings in the $1.5 billion range, therefore, are unlikely to occur simply through corporate function rationalization in China and Toronto.

One of the most significant benefits of the merger is that it defends against the rapid growth of other major brewers in the world. As the industry matures, consolidation is rampant. Both InBev and A-B were threatened by the emergence of massive conglomerates such as MolsonCoors and SABMiller. The A-B InBev merger wards off any potential...

market. Prices are low as a result of intense competition. Industry players are more oriented to trying to increase prices, since cutting prices further would damage the bottom line. The emergence of premium InBev brands in the U.S. would increase average beer prices, rather than decrease them. Further, the impacts of rationalization are unlikely to yield significant cost savings in North America, which means that the combined entity is unlikely to pursue lower prices, but will rather attempt to win market share through growth in the premium segment instead.
Works Cited:

No author. (2009). InBev completes Budweiser merger. BBC. Retrieved November 27, 2009 from http://news.bbc.co.uk/2/hi/7735953.stm

No author. (2007). 2007 NAICS definition. NAICS. Retrieved November 27, 2009 from http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=312120&search=2007%20NAICS%20Search

Press Release. (2008). InBev and Anheuser Busch agree to combine. Anheuser-Busch. Retrieved November 27, 2009 from http://www.anheuser-busch.com/Press/PressImages/FINAL%20PRESS%20RELEASE.pdf

No author. (2009). Mergers and acquisitions: Definition. Investopedia. Retrieved November 27, 2009 from http://www.investopedia.com/university/mergers/mergers1.asp