Anheuser-Busch InBev, SABMiller, Heineken and Carlsberg pull away from the pack - Rabobank

Anheuser-Busch InBev, SABMiller, Heineken and Carlsberg pull away from the pack - Rabobank

Many medium-sized brewers have been put off acquisitions because they consider deals too expensive, according to a new report by Rabobank.

The average price of brewing acquisitions has risen significantly over the last decade, prompting several middleweight brewers to stay away, Rabobank said in a report published this month. Many do not believe that the mergers and acquisitions market offers value for money, according to the Netherlands-based bank, which surveyed a cross-section of large and medium-sized brewers around the world for the report.

"Some had the view that the market was overheated and that prices were too high," said Rabobank analyst Francois Sonneville, who wrote the report. Others argued that the benefits of an acquisition "often end up with the company that is acquired", rather than with the buyer, he told just-drinks today (16 December). 

Deal prices have become proportionately more expensive, Rabobank figures show. In 2000, companies were paying around 10 times their chosen target's EBITDA. However, in the last four years, most deals have totalled 12 times EBITDA and above.

Rabobank's report shows that the so-called 'top four' brewers - Anheuser-Busch InBev, SABMiller, Heineken and Carlsberg - are pulling away from the rest of the field. Industry consolidation means that the four account for around 40% of global beer sales by volume, three times as much as the top four players a decade earlier.
Sonneville added that part of the reluctance of medium-sized brewers to participate in the mergers and acquisitions arena comes from the difficulty in measuring the benefits of a takeover. Return on investment in the brewing sector, he said, is often a "long-term process".

Rabobank analysis shows that most acquisitions will not add value to a buyer's earnings for at least two years.

However, Sonneville reiterated statements from other analysts that consolidation in the global beer sector is far from over. For medium-sized brewers, it could be a case of eat or be eaten. "The perception that acquisitions cannot add value at current prices is unjustified," said Sonneville. "For parties involved, it’s better to at least be at the table than on the menu."