The Anatomy of a Strategy AB/InBev SABMiller”The Super Mega Brewery Merger” Part I: The Transaction For this analysis, I have chosen to do an in-depth study on the AB InBev’s acquisition of SABMiller. These “two” entities are inherently product of mergers of their own in the past. AB InBev was formed due to the merger of Interbrew, based in Belgium, Anheuser-Busch, based in the US, and AmBev from Brazil. SABMiller was formed by the merger of South African Breweries, SAB and Miller Brewing Co. Upon the completion of this merger, all entities dissolve into a new company, Newbelco. As a result of this merger, the former Anheuser-Busch InBev has merged into Newbelco, which inherently becomes the new holding company for the combined former Ab InBev and SABMiller. Making Newbelco owner of all assets and liabilities of both entities, which has been operated and passed under Belgian law. (See Appendix A, B) AB InBev even before the acquisition of SABMiller, was a powerhouse of beverage production and distribution worldwide which at that point was the world’s largest brewery. With this merger, AB InBev being the market leader purchases the second largest brewery in the world, SABMiller, laying the groundwork for a powerhouse company with assets and distribution in virtually every territory. This allows them to have control of 30% of the global beer market share, availability to other “untapped” markets, bringing a much larger presence in developing countries to the likes of China, Africa, and South America, where SABMiller was established. “… the merger will have minimal impact on the US beer market, but will substantially increase AB InBev’s access to SABMiller’s operations in emerging markets in Latin America and Africa (Chicago Tribune).” AB InBev purchased SABMiller for an estimated $100 billion dollars, which makes it one of the largest mergers in the history of its kind. Since it was such a big deal, literally and figuratively, the Department of Justice had some antitrust issues and therefore had to revise this deal before approving it. They came to the conclusion that in order to allow AB InBev to purchase SABMiller, they had to abide by the following: AB InBev will sell SABMiller’s stake in MillerCoors AB InBev will end its practice of rewarding distributors who sell more of their beer than their competitors. All future acquisitions of craft breweries will be reviewed by the DOJ (since they have been purchasing rampantly, i.e. Goose Island) Source: James Cosgrove for Juristat “Hold My Beer: An Analysis of the InBev/SABMiller Merger” 2016 Part II: The Subject IP This business transaction between AB InBev and SABMiller is a merger reforming under its new name, Newbelco. In order for this new venture to be successful and reap the full benefits of a proper merger, there needs to be a crossover of content. For this analysis, we will be focusing on the intellectual property of both tangible and intangible assets that have had to been assigned over to Newbelco from both brewers, AB InBev and SABMiller in order for business to operate as usual, if not better. For clarity, AB InBev prior to this merger had already acquired SABMiller, for which it is assumed that the mention of AB InBev in this analysis is inclusive of SABMiller since it has been absorbed by AB InBev. I know, I need a beer after trying to figure out the buyout timeline too. (See Appendix A, D) Due to the extensive nature of this deal, there are several intellectual property rights associated with this transaction. These assets include but are not limited to patents, trademarks, trade secrets, copyrights, supply and distribution rights and know-how. Since these transactions were essentially done one after the other, all intellectual property rights have passed along subsequently Ab InBev having SABMiller rights assigned to then have been absorbed by Newbelco, therefore all rights have been assigned, not licensed to the current company. The AB InBev assignment includes all assets, liabilities and any sensitive information needed to fully operate the business without tarnishing the brands/products in the eyes of the consumer. All assets and intellectual property to be absorbed (See Appendix A, C) as consequence of this merger are: All intellectual property rights include: all drawings, logos, patents and trademarks of which AB InBev is the holder (including all previously assigned IP from SABMiller) or beneficiary, and any applications for any intellectual rights; Regarding the rights of intellectual and industrial property transfers to Newbelco as a result of the merger, the board of directors of the latter company will fulfill the necessary formalities to produce the enforceability of the transfer owed towards all, in compliance with the applicable significant legislation on this matter. The transfer of assets in effect by means of transfer under universal succession of title also includes all current agreements, including those conducted with employees which Ab InBev has entered into. Other assets that may not be relevant to intellectual property but form part of the deal may include any multi-year sponsorships still in effect at the time the merger was implemented. The transfer of all the assets of AB InBev to Newbelco includes an addition to the assets and liabilities aforementioned (See Appendix A, D.) Its activities with the related permits, concessions and/or the benefit of the registration of patents and trademarks, the right to use the trade name, the brands and logos of AB InBev; it’s clients, the benefits of its organization, its accounting resources and funds and any and all intangible components specific and related to the general association of AB InBev. Newbelco takes over the rights and all duties of AB InBev in relation to its business transferred in full, which would include any and all registration, any claims for which AB InBev is liable regardless of any guarantee by securities and mortgages as Newbelco takes full responsibility for such in order for this merger to be finalized. As it is with any business venture, there is always risk before reward. A potential risk factor I have identified in the analysis of this merger is the effect it might have on the preexisting brands and product line suffering due to this transition. Whether it be from the now reigning institution failing to secure or renew any copyright and trademark licenses or changing marketing in ways that it affects brand recognition. However, AB InBev is the owner of most of the worldwide known beer brand in the industry. As a result, these brands and products are well established given AB InBev has been a leader in the beer industry for over 600 years. Just as long as these products keep getting distributed, they have taken an empirical meaning that goes beyond the Newbelco acquisition.Apart from the general IP they now have ownership over, one of the main reasons for entering a deal of this magnitude is the territories, products and established worldwide distribution channels all individual parties had access to before the merger. All supply and distribution rights that were exclusive to AB InBev and SABMiller now are under Newbelco. This includes the right to supply to a specific retailer (client) or consumer and the commitment consumers have to them, meaning the merger shall not affect brand loyalty for the products previously distributed by the individual brewers. Distribution rights are tied to a specific territory for which now Newbelco has access to all markets previously exclusive to both then independent suppliers. To give you an even better idea of how intellectual property will be fused as a result of this merger, as separate entities, as of 2015 Ab InBev had 23 beer-related patent families and SABMiller had 9. What I found most interesting in this, drafted in a study by Marcus Malek for Aistemos, is how the patents divide into categories, meaning what patents they have more of. For AB Inbev’s portfolio, 40% comes from container/can patents, followed by beer related patents at a 21%. Considering they own or are affiliated with major beer brands, this is a significant piece of the beer market pie. Now in conjunction, Newbelco stands as one of the leading patent owners in the European/American beer companies. Source: Malek, Marcus. “Strange brew: beer patents under the microscope – Industry Reports.” Strange brew: beer patents under the microscope – Industry Reports – IAM – Informing IP value, In conducting research, I have found that during and after the merger, both parties have entered into numerous Non-Disclosure Agreements, for which they refer to as Confidentiality Agreements. Everyone from shareholders, investors and employees involved in the transitional process they refer to as “Clean Team”, which handle sensitive material from both Ab InBev and SABMiller, for which both parties have agreed to disclose any and all information regarding business operations and other sensitive material in order to ensure a smooth merger. This Confidentiality agreement includes an extensive data sharing protocol and breaks down employees in ranks as to who can handle sensitive vs non-sensitive information. This is relevant to intellectual property and this transaction because a lot of the information they handle is valuable IP in form of valuable data, trade secrets, among others. This is the first step before even talking about assignment versus licensing and who owns what, to ensure the proper protection of your assets and not jeopardize any information during this complex transitional merger process. Part III: The Analysis While there may be multiple reasons as to why Ab InBev decided to merge with SABMiller, there are several enticing motivators that made both parties agree on this mutually beneficial merger. Why compete when you can join forces? This rationale leads the main motivator for this deal, since both companies had access to separate regions and resources, this merger successfully created the world’s first truly global brewery. There are also several geographical benefits to this deal as it pertains to tapping into new markets both parties had exclusive access to prior to the merger. These include smaller, international markets such as Africa, Asia, Central and South America. Another significant benefit of this merger is a greater talent pool and more resources for marketing, sales, product line, etc. A larger talent pool with greater access to resources means potential of growth from product line and more room for innovation, which can benefit production, sales and consumer base exponentially. The obvious benefit from this merger is, of course, money. Other than revenue and cash flow growth, investors and shareholders, which are often the more reluctant party of mergers like this due to the potential risks that come out of deals like this, will have a greater value to their shares since there are more brands associated with their shares. Note, the deal states that shareholders have the option to take their shares and leave before the merger is complete or stick with being a shareholder under Newbelco. This is where you can truly see the value of IP grow. It is often hard to imagine or put a value to something so complex as a brands intellectual property, however, in this case we can see how both separate entities’ IP as they merge, they create a greater overarching value by “joining forces.” From a marketing standpoint, this is a challenge since something so customary as beer/beverages like Miller-Coors or Budweiser have been around for so long, the transfer or merger of IP at this level has to been done with great caution, to make sure the value of the IP either remains the same or goes up from there, but never downward. Due to such a large transition, to ensure the value of their individual brands goes untarnished, they have entered into a collaborative agreement as part of their deal terms, which they call the “Convergence Planning Team”. This is divided into two categories, depending on what type of information is getting handled. The Clean Team handled commercially and competitively sensitive information as opposed to the Non-Sensitive Information Team, which handles legal counsel and material that are neither competitively or commercially sensitive. These measures, along with having them sign NDA’s (see Appendix F1, F2) are ways in which not only they protect the value of the IP but ensure employees take necessary precautions in handling information properly during this crossover. All of these procedures and resources form part of the overall value of the IP, which I believe they are fully cognizant of the power this merger has on the value of such, therefore adding to the new value of the IP post-merger, under Newbelco. I do believe this merger has been one of the most successful ones I’ve researched due to how powerful both parties were before the merger and how they managed to become even more powerful after the merger. Sometimes, as I’ve stated, when companies at this caliber decide to merge, it comes with a higher risk due to how this merger can affect both brands, their value and status in the market they serve, i.e. the consumers. Newbelco is the perfect example of the power of developing and protecting your intellectual property as well as number wise, it shows us exactly how valuable intellectual property is, which is why Ab InBev had no issued “hashing” out big money, $100 billion to be exact. Some general concerns I had, especially as it pertains to how that would affect distribution, access and brand recognition, they’ve all clearly addressed in the deal terms and documents, inclusive of how and what will be transferred over as well as the importance of brand protection of products created outside of the scope of this deal, to remain untarnished. The great attention to detail that both parties have is outstanding, given the size of this merger and all parties provided. Don’t get me wrong, then information is dense and can get overwhelming, however, all the documents and agreements drafted were completely necessary to ensure that this dissolvement goes smoothly and less at the expense of the consumer, giving their loyal reassurance that the same quality product will continue to be produced.