Essay About Potential Risk Factors And Ab Inbev-Sabmiller Dealin

Potential Risk Factors and Challenges Ahead for Ab Inbev-Sabmiller Deal
Potential Risk Factors and Challenges Ahead for AB InBev-SABMiller DealIn the present business and economic environment, cross-border mergers and acquisitions have become more of a trend. With increasing globalization organizations are expanding globally backing this expansion by mergers and acquisitions. However there are many complexities of merger and acquisitions across national borders that need to be tackled. AB InBev and SABMiller have such a vast international presence that both companies need to account for the following factors while considering this deal.Difference to accounts for in areas such as PoliticalLegalEconomic/FinancialCulturalHuman resource related potential risksLabor LawsHealth Benefit ProgramsNational RegulationsUnion and Worker councilWork conditionsLocal Employment RestrictionsCultural IntegrationEmployment Security laws etc.AB InBev is present in around 25 countries in the world, with a global market share of 25%. With the InBev and SABMiller merger, it will become more powerful with much larger market share. This amalgamation would combine existing operations both distribution and manufacturing, and might not require huge capital investments. Although both companies will definitely be enjoying synergies from this merged deal, but they will be facing some challenges too.REGULATORY CONCERNSThe biggest of them is regulatory concerns as both companies have established business internationally, this merger can be a point of concern in different countries because of its huge size especially in US and China, as the merged entity could suppress competition and limits consumer choice. In US, AB InBev has approximately 45% of the total market share, while SABMiller controls further 25% share. In China, AB InBev owns 14% market share, according to Euromonitor International. DELAYS IN SOUTH AFRICAAnother major challenge for the $100 billion deal is the probability of facing delays in South Africa, where SABMiller first started selling hard drinks 120 years back. In South Africa, SABMiller currently employees approximately 8,800 people and it contributed nearly $1.2 billion in the last fiscal year. AB InBev is famous in the corporate world for its cost cutting strategies. This has alarmed local labor union in South Africa, as for a country with an unemployment rate of 25%. The potential loss of jobs poses a great concern. AB InBev might think of cutting jobs, as an attempt to reduce costs. The union had advised the government not to approve a deal that will create the company. The government’s agreement depends on the assurance of worker’s job security.  SABMiller was formed from the 2,002 combination of South African Breweries and Miller Brewing, tracing it roots to the fields around Johannesburg in the 1800s.