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August 2018

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« Don’t Shoot the Messenger | Main | More on Mergers »

Anheuser Busch – InBev and Family Businesses

Although I don’t have a dog in this fight, the recent InBev – Anheuser Busch situation has been instructive.  Reader’s comments have run the gamut…

 ·                    From an A-B wholesaler

InBev has only grown by purchasing brands; they’ve screwed up everything they’ve touched… I’m damn scared.

·                    From a Miller/Coors wholesaler

InBev has only grown by purchasing brands; they’ve screwed up everything they’ve touched… I can’t wait.  If they think the Miller Coors JV is going to cause disruptions, wait till we get the InBev A-B consolidation… we are in for a treat.

·                    From a large A-B wholesaler

This is depressing.  I haven’t heard one valid business reason from Anheuser Busch to fight this acquisition.  Anheuser Busch is a large public company and should be run as such… not the Busch’s private fiefdom.  My business hinges on a CEO whose primary goal is to have his father respect him?!  God help us all.

·                    From a mixed beer and wine/spirits dist

 I always wonder at these public companies where management’s sole goal seems to be to protect their rice bowl.  What about the true owners of the company, the shareholders?  They take these poison pill options… if purchasing the other half of Modelo was such a good idea, why is it only done to fight off a take-over?  Why wasn’t it done last month or last year?   

·                    From a large Miller/Coors dist

Even though I fight A-B every day on the street, I’ve always hedged my bets by owning a lot of A-B stock.  Analyzing this from solely a shareholder’s position, I don’t give a damn about what the 3rd or the 4th want.  I can run my business however I care, it is 100% mine.  A-B is a public company and the Busch family has very little stock… this deal should be examined for maximizing shareholder value, nothing else.  Adolphus is right.  InBev might have a difficult time making the thing work but for A-B shareholders it reads like a good deal to me.

·                    From a medium sized A-B dist

Fight, fight, fight!  A-B should NEVER sell.  It is a proud US company and should remain one.  Had many responses in a similar vein.

·                    Another A-B dist

I still remember the day the 3rd told us how he had made us all rich, and demanded exclusivity.  I’m a loyal Anheuser Busch guy who bleeds Bud… selling to InBev will F*** the A-B wholesaler.  Fight for us too.  Many similar responses.

·                    From a large Miller/Coors dist

The beer market is now a global market.  A-B is going to have to partner with someone just to remain in the game.  No tears from me but August IV is getting beat up for strategic mistakes that were made long before he took the helm.  But I am enjoying the show. 

·                    Another A-B dist

The A-B distribution network is the strongest in the land.  InBev isn’t stupid enough to try to mess with this… to say nothing of MANY laws which restrict their options.  I think this merger would be good for A-B and A-B wholesalers.  A few similar responses.

·                    From a medium sized Miller/Coors

hee hee hee, if InBev buys A-B, A-B is screwed.  If they don’t buy A-B and instead purchase SABMiller, A-B is screwed.  Those chickens are coming home to roost.  I’m from the SE and they more than had their day but the future is MINE.

 So the range of opinions and beliefs span the board.  I’m glad I don’t have a dog in this fight.  Whether an idea or action turns out to be “good” or “bad” is only determined in the future, so we will just have to wait and see how this one shakes out.

 But regardless of how the A-B  -  InBev thing is finally settled, the episode brings into sharp focus a significant issue most beer wholesalers around the country confront and one which this final note captures…

 ·                    Another A-B dist

 My great grandfather started this business, from prohibition to today.  I KNOW what it means to run a family business with a long and proud tradition.  It is in my blood.  August isn’t the only one who confronts these issues.  I have a great offer in front of me and it makes financial sense to take the money… but can I live with being the one who sold the family business?  What is your advice John?

 If I had the magic answer to this question and one more… what would I do if I sold?... I’d be on my yacht in Tahiti.  But I profoundly understand the issue.  Considering the sale of a family business is one of the most difficult choices any person will ever make.  I have started a number of companies in my day and the bond one feels to one’s own company is extremely strong.  I always think of a company as an infant who will never grow up.  You have to speak for it.  You have to direct it.  You have to protect it.  In many cases a family business is more important than your wife or even your children.  This might sound shocking but if you examine reality you will find it is true in many, many cases.  So the first step is to just accept that these businesses are FAR MORE than just a financial asset.

Your family distributorship is much different than owning some shares in some large public company.  Throw in the fact that it might have been started by previous generations and it gets even more complicated.  Add the fact that most business owners with children would like to see their children continue the business in some manner.  Toss in another fact that in many cases the compensation and benefits the owner/family receives is FAR greater than they could expect to generate out in the “real world” and it gets even more complicated.  As the A-B distributor above notes, the Busch family isn’t the only one that confronts this conundrum.

And just like the Busch family, wholesalers often have some shareholders who participate in the business and others who don’t.  It is almost universal that the outside owners think the insiders take too much money and benefits, and have it too easy.  The insiders think they are busting their hump for those ungrateful outside shareholders.  Outsiders often want to sell and cash out… insiders want to stay.  No easy answers.

So what to do?  For wholesalers who are confronting the issue of what to do with their family business, I generally visit them and talk to all the players in confidential one-on-one meetings.  I have very good empathy (if I do say so myself) and am an unbiased 3rd party who knows the realities of this industry very well.  In addition, I represent the interests of the company… not any individual or group.  And don’t worry about me using this process to sell you some brokerage services… that is simply morally and ethically wrong.  If in this process the decision is made to sell, I can’t in good faith then turn around and try to pop you for some big brokerage commission... thus guaranteeing my complete and honest assessment of the situation and my complete loyalty to you, my client.  Maybe the answer is to sell.  Maybe it is to buy.  Maybe it is operational.  There are many possible options and the solution is probably a number of steps taken in sequence.  Give me a call if you want a hand in addressing this very complicated issue.

But a quick check list of actions is probably something like this… First pause and pull back from your organization.  Just for a moment put your wants and desires aside and analyze your business situation.  Based on the most likely future(s) you confront and your present situation is the long-term continuation of your business a reality?  I know it is difficult but try to put some odds to it.  Your answer is probably going to be either yes it is long-term viable, no it is not, or it depends.  In many, many cases the answer will be it depends

Next, put your wants and desires back into the mix.  What is your ownership and family situation?  The first part was a “from the head” analysis.  This one should be “from the heart”.   And remember, just because your business is long-term viable doesn’t mean that selling isn’t an option.  It is a mix of head and heart.  The Dawson’s from Texas are a perfect example.  There is little doubt that BudCo was long-term viable… but they had an offer – a great one from what I heard -  looked to their heads and hearts, and decided the best course of action was to sell.  It is a multi-faceted process.  Financial comparison between selling and staying.  Impact on family members.  Potential operating options… mergers, shared services, acquiring.  Value expectations… up or down in the next X years?  Operating capital needs in the next 5 – 10 years.  Taxes.  Your aversion to risk… cash in hand is always the lowest risk option but is it the right one?  A lot of things go into the mix.  And if you decide to stay and fight, you need to assure you have a focused and integrated strategic and operational plan to ensure your long-term success.

 And of course what about multiple children?  Or children from various partners?  How do you keep things fair?  Does everyone participate?  No one?  Often not a lot of easy choices.

The toughest situation is when the head analysis says one thing and the heart analysis strongly disagrees.  My personal feelings in these situations are as follows… I give my honest advice… I might be right or I might be wrong but I will tell you what I think and the reasons behind my thinking.  You can choose to follow my advice or ignore it.  Ultimately it is your ball and you can do with it what you will.  My goal as your advisor is not to have you just follow my advice, but to help you succeed in whatever choice you make… and to ensure you fully understand the implications of the choices you make.  To ensure whatever direction you decide to take, you do so with your eyes wide open and have a plan in place to help ensure your decision ultimately succeeds.

No one wants to be the one to sell the family business, ask the 4th.  But then again, no one wants to be the one who didn’t sell the family business and steered the ship while millions and millions of dollars in value… that’s family value, not yours alone… simple evaporated into the air.  So to my A-B distributor friend who sought my advice, the answer is as usual… it depends.  And no, I didn’t leave this distributor in the lurch… I have helped him analyze his situation and he is presently trying to mesh the head and heart. 


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