In business hard ball,

A-B hasn't stuck out

Thirty years ago, a colleague and I published a paper in the Journal of Finance that identified the valuation implications of attempted corporate takeovers. Up to that point, little was known about the impact on the bidder and target firms involved in these confrontations. The major finding of our research

parallels the Anheuser-Busch-InBev struggle.

Prior to the takeover bid, the target firm's relative value had fallen by a substantial amount. Correspondingly, the bidder firm's valuation had an abnormal increase relative to market benchmarks. In our sample (drawn from cases in the 1960s and 1970s), many bidder firms were offering premiums of 50 percent to 100 percent of the pre-announcement value of the target firm. The post-market results also were of significant interest. Despite the large premiums offered to the shareholders of the target firm, the relative post-market value of the bidder firm continued to increase. One could posit that as the market learned of cost-cutting measures or managerial changes, these outcomes were reflected in improved shares prices.

From a local perspective, it is unfortunate that there is a strong likelihood that A-B may be taken over by InBev. However, from a global perspective, it's hardball all the way. You have to be on the top of your game to survive. Capital flows freely across the world, seeking the best returns. InBev has not mounted a "surprise takeover," as were the cases in our study. One has to believe that InBev recognizes that the value of the purchase requires maintaining national brands and marketing channels.

In the end, I'm unwilling to say that A-B has "struck out." From a positive standpoint, synergies from the combination of these firms will result in a stronger global organization that can remain a key player and contributor to the St. Louis region.

Don Kummer | St. Louis

Associate Professor, College of Business,

University of Missouri-St. Louis