Pepsi and Quaker Merger
OUTLINE
Introduction ………………… 3
1. The business – economic setting a. The Business Strategy …………………. 4 b. Mission and Strategies …………………. 5
2. PepsiCo Strategic Positioning a. Industry Analysis …………………. 6 b. Company Background ………………… 7 c. Snack Food ………………… 7 d. Beverages ………………… 8 e. Company History – PepsiCo ………………… 9 f. PepsiCo Financial Analysis ………………… 10
3. Terms of the acquisition a. How large was the premium paid to the target ….. 12 b. PepsiCo's Acquisition of Quaker Oats ………… 12 c. Quaker boosts Pepsi’s results ………… 13
4. Merger transaction analysis ………………… 14 a. Target Firm Valuation ………………… 17 b. Discounted Cash Flows ………………… 17 c. Consolidated Cash flows ………………… 18 d. Test of Merger Performance ………………… 19 e. Evaluation and Prognosis ………………… 19
5. References ………………… 22
Pepsi and Quaker merger analysis
Introduction:
This case talks about the latest trend of mergers and acquisitions and the ensuing fallout. The concern here is about the $14 billion merger of PepsiCo and Quaker Oats. After a long delay with regards to granting permission for this merger, the Federal Trade Commission (FTC) finally gave the go ahead after it realized that there was a split in the opinion of its members. 50 percent of the members voted in favor and the rest against the decision for the merger. This committee was set up to investigate the fairness of the deal with respect to the marketing principles commonly followed. Due to the split in decision, the entire investigation was called off, allowing the deal to proceed.
FTC staff had objected to this merger since they believed that this kind of merger would kill competition in the sports drink market segment. This would lead to an almost monopolistic scenario and give PepsiCo the overriding authority in
Introduction ………………… 3
1. The business – economic setting a. The Business Strategy …………………. 4 b. Mission and Strategies …………………. 5
2. PepsiCo Strategic Positioning a. Industry Analysis …………………. 6 b. Company Background ………………… 7 c. Snack Food ………………… 7 d. Beverages ………………… 8 e. Company History – PepsiCo ………………… 9 f. PepsiCo Financial Analysis ………………… 10
3. Terms of the acquisition a. How large was the premium paid to the target ….. 12 b. PepsiCo's Acquisition of Quaker Oats ………… 12 c. Quaker boosts Pepsi’s results ………… 13
4. Merger transaction analysis ………………… 14 a. Target Firm Valuation ………………… 17 b. Discounted Cash Flows ………………… 17 c. Consolidated Cash flows ………………… 18 d. Test of Merger Performance ………………… 19 e. Evaluation and Prognosis ………………… 19
5. References ………………… 22
Pepsi and Quaker merger analysis
Introduction:
This case talks about the latest trend of mergers and acquisitions and the ensuing fallout. The concern here is about the $14 billion merger of PepsiCo and Quaker Oats. After a long delay with regards to granting permission for this merger, the Federal Trade Commission (FTC) finally gave the go ahead after it realized that there was a split in the opinion of its members. 50 percent of the members voted in favor and the rest against the decision for the merger. This committee was set up to investigate the fairness of the deal with respect to the marketing principles commonly followed. Due to the split in decision, the entire investigation was called off, allowing the deal to proceed.
FTC staff had objected to this merger since they believed that this kind of merger would kill competition in the sports drink market segment. This would lead to an almost monopolistic scenario and give PepsiCo the overriding authority in