After a month or so of courtship, SABMiller finally agreed to Anheuser-Busch InBev’s advances this week. The pair have settled on a provisional deal worth £44 per share to most of SABMiller’s shareholders – up 50 per cent on the price the day before rumours about the deal began to circulate.
The combined "mega-brewer" will produce one in every three beers sold around the world and see Budweiser join brands such as Peroni and Grolsch. No doubt, the $1 billion in efficiencies the deal will bring will include the new group’s marketers looking at their agency roster at some point in the future. But that is not why I’m writing about it. The deal is one of those that is so large and bombastic, it makes you wonder if everything in the economy is quite as rosy as it seems.
Lorna Tilbian, the head of media, corporate broking and advisory at Numis, says there has been an audacious merger or acquisition at the height of every cycle. After AOL’s $164 billion purchase of Time Warner, the dotcom bubble burst spectacularly. What facilitated those heady days of excess was central banks keeping interest rates low. In the late 90s, interest rates were reined in as a response to the Asian financial crisis and Russian default.
Tilbian sees similarities between the problems of 1997-1998 and August’s stock market collapse in China, dubbed by The Economist and others as the "Great Fall of China". She now expects central banks to keep interest rates flat as a result. Judging by today’s Bellwether Report, UK marketers are also feeling increasingly cautious. The report sees the smallest proportion of marketers increasing their ad budgets for two-and-a-half years.
The Bellwether marketers are also feeling ever-more cautious about the future of their own companies and sectors. Marketers’ confidence in the prospects of the company they work for is also at a two-and-a-half-year low, while their bullishness about the wider industry they inhabit was the lowest it has been for nine years. As a result of these jitters, the report has cut its forecast for adspend growth this year from 4.2 per cent three months ago to 3.7 per cent now.
As the Bellwether Report explains, this softening was first predicted at the end of last year. But even if it is not likely to come as a total shock, it is unwelcome news. For her part, Tilbian believes there is a lot more to commend the coming together of AB InBev and SABMiller than there was for AOL and Time Warner. But even if that deal isn’t the one that will signal the beginning of a more difficult time, we should be on the lookout for one that is.