Lessons From the Suntory – Beam Acquisition

Japan’s Suntory is making a big investment in buying the makers of Jim Beam for $13.6 billion. Jim Beam is a highly branded U.S. company and this deal is second largest acquisition of a U.S. company by a Japanese buyer.  The underlying concept is the folks in Japan have recognized their domestic markets are not growing and they see the U.S. as a higher growth market with more opportunity to expand their product and become a significant player.

If we take a look at the numbers, the acquisition purchase price is 20X EBTDA. That’s a big number and if Suntory can’t figure out how to cut costs, and I don’t see a lot of cost saving benefits, or grow the business, they are looking at about a five percent return on their money. So this is not a huge investment return unless Suntory gets better growth out of this business.

This acquisition also demonstrates the power of moving quickly and decisively. It’s reported that this transaction came together in under 60 days. The ability to move quickly is an advantage. Suntory had confidence that acquiring Beam would place them in a market they wanted to pursue. They didn’t hesitate. This is why I emphasize a demand-driven, markets first approach when pursuing acquisition.

Before speaking with acquisition prospects, find the right markets so you have the confidence and conviction to move forward in a transaction rather than contemplating each opportunity for an extended period of time. If you wait too long in your M&A discussions with your prospect, they may lose interest or be uncertain about the deal. On the other hand, speed assures the seller of your commitment and can help seal the deal.

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