Question

In August 2018, PepsiCo announced it was acquiring SodaStream for $3.2 billion. Using concepts from the lecture and articles on M&As answer the following questions in 2-3 sentences each:

1) Explain what type of M&A this deal represents.

2) Provide justification for the price of the acquisition.

3) State whether or not you believe this is a good deal for PepsiCo and why.

Answer 1

In August 2018, PepsiCo announced it was acquiring SodaStream for $3.2 billion. Using concepts from the lecture and articles on M&As answer the following questions in 2-3 sentences each:

1) Explain what type of M&A this deal represents.

Ans: It’s type of horizontal mergers, as PepsiCo and SodaStram offer similar products to the final consumer and they are in the same stage of production. Hence, the acquisition is in the nature of Horizontal merger.

2) Provide justification for the price of the acquisition.

Ans: PepsiCo has paid $144 per share for SodaStram outstanding stock, equivalent to 32 percent premium to its 30 days share avg. price. This deals gives PepsiCo a new line through which it can reach final customer in their homes rather than through store. It also helps the Pepsico to cross sale its product and service to final customer to increase overall sales at group.

3) State whether or not you believe this is a good deal for PepsiCo and why.

Ans: Its seems good deal to Pepsico, deal unable Pepsico to double its drink business, as the Company is suffering in North America as customer moves away from Sugary, Carbonated beverages. It address the challenge of brand risks cannibalizing legacy beverages.