Soda company merger estimation case

Case Mergers & Acquisition
New answer on Dec 07, 2023
2 Answers
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Anonymous A asked on Jun 30, 2018

Hi,

three soda franchise companies in Europe consider a merger due to decreasing profitability. Reasons for the profitability loss are new small competitors and the anti-sugar trend. They offer a range of products, but not each company offers all products (e.g. company A offers 1 and 2, but not the 3rd product). They operate in different markets in Europe, but those are culturally similar. The revenue for all three is in total 30 Billion (equally distributed), 20.000 employees (equally distributed). Profitability is 0.30.

Would you recommend a merger or not? Choose a KPI and estimate a number that you use to support your recommendation.

Btw: You get no additional data. Estimate everything you need.

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Best answer
Rose replied on Dec 07, 2023

Hello,

I think based on the estimated combined market share of 85% after the merger, it appears that a merger would be recommended. The higher market share achieved through the merger could improve the companies' competitive position, potentially enabling them to regain lost market share, counter the challenges posed by new competitors and the anti-sugar trend, and enhance profitability.

However, it's important to consider other factors such as cultural similarities, operational synergies, cost savings, and the ability to effectively integrate the different markets in Europe. These aspects would impact the feasibility and success of the merger. Without further data, it is challenging to provide a comprehensive analysis, but the estimated market share supports the recommendation for a merger.

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Marco-Alexander
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updated an answer on Sep 05, 2021
Former BCG | Case author for efellows book | Experience in 6 consultancies (Stern Stewart, Capgemini, KPMG, VW Con., Hor

(edited)

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