Business Establishment Assignment 21.07

Business 

Establishment 

Assignment 

Charlotte Alexander 

This is a solution of business 

establishment Assignment in 

which we discuss Developing 

business financial and strategic 

performance. 

O n l i n e A s s i g n m e n t H e l p

Introduction 

With the liberalization in trade policies, there are increasing number of new 

business establishments taking place all over the world. In many countries 

where initiation of new businesses communication by foreign companies is 

not easier; entrepreneurs adopt different other routes like acquisition, 

mergers, joint ventures and foreign institutional investments. In respect 

with this aspect, the following report is carried out to evaluate the 

feasibility and profitability of the acquisition of a liquor brand. The firm 

aiming to acquire is Suntory which is established in Japan, while the target 

business Distill is based in UK. The objective of the report is to analyze the 

financial and strategic performance of Distill in terms of profitability and 

sustainability. 

About Suntory 

Suntory is engaged into brewing and distillation since 1899 and is 

considered as one of the oldest in the alcohol industry. The enterprise also 

produces soft drinks and sandwich as part of its expansion. Suntory jumped 

onto international platform and became one of the largest distillation 

beverages with the acquisition of Beam Inc in 2014. 

About Distill 

Online Assignment Help 2

Blavod Wines and Spirits plc is engaged into production and marketing of 

owned and third party brands across the world. The firm changed its name 

to Distill in 2014 in order to reflect the nature of the business. The previous 

company was result of the merger between Blavod Black Vodka and 

Extreme Beverage. 

TASK 1 

1.1 Value creation and the success of an M&A 

transaction 

The acquisition of Distill is not only for the purpose of business and market 

share expansion. It equally requires sufficient strategies to support the plan 

and deliver desired results. Suntory can also develop the existing Distill 

brand and focus on leveraging the benefits from the existing projects. 

 

 

Trust – It is essential for the management of both the brands to develop 

trust among themselves, employees and customers to support in managing 

operations post acquisition. This is important, so that existing and 

profitable projects of Distill remain as usual (Rigby & Bilodeau, 2007). 

Trust among the employees is also an important factor in the success of the 

acquisition to retain skilled employees. 

Common goals – The acquisition deal will succeed when the goals and 

objectives of both the companies are similar for the long term aspects 

(Weihrich & Koontz, 2005). Difference in the overall goals will impact the 

functioning and operation of the larger firm. 


Cost control – The acquisition deal will certainly require huge investment 

in various areas. So it is important that Suntory will control cost and 

eliminate excess capacity. Business areas in terms of physical and human 

resources not leading to effective results must be identified and evaluated 

for cost purpose (Robinson & Harris, 2000). 

Improved market share – Suntory will definitely benefit from the 

existing market share of Distill. It is essential for the expanded firm to 

maintain the brand image and reputation with the stakeholders to avoid 

any unwanted issues (Slack, Comtois and McCalla, 2002). 

Research & Development – An important success factor for Suntory 

will be the acquisition of human skills and abilities from Distill (Rossi & 

Volpin, 2004). The expanded firm can utilize this for R&D and other 

important business areas. 

Competitive advantage – It is also important for Suntory to continue 

maintain the competitive advantage developed by the Distill. Any lost 

competitive advantage would hamper the position of Suntory in present 

and future (Weihrich & Koontz, 2005). 

Combined synergies – The acquisition of Distill will enable Suntory to 

gain from the exclusive products and service areas owned by Distill. 

Efficient use of employees’ capacities – The expanded larger firm will 

increase the number of employees allowing the business to restructure and 

utilize full potential of the human force (Slack, Comtois and McCalla, 

2002). Existing employees of both the firms can be shuffled and placed into 

new groups and projects. 


1.2 Current M&A and Private Equity strategies 

of and appraise suggestions for improvement 

of current practices 

Suntory has earlier successfully acquired Beam Inc and is gaining positive 

results. This time the enterprise is planning to target a UK based company. 

There are certain factors which need to be considered by both the firms in 

the deal to avoid unnecessary issues and improve the performance 

(Cartwright and Cooper, 2012). Following are discussed some of the points 

which must be considered by Suntory and Distill before and after the 

acquisition - 

A risk management approach should be the foremost task for both the 

firms. There may be certain risks that are exclusive to both Suntory and 

Distill and may impact the functioning of the expanded firm. A consultancy 

can be hired to identify and manage risk associated with the market and 

business (Moeller & Schlingemann, 2005). Another important area is to 

evaluate the supply sources. Based in different countries, it is possible that 


oth companies were sourcing from different suppliers. At present Suntory 

is not planning to move the manufacturing and the factory area, but it may 

expand it in the near future. So it is important that current suppliers must 

be checked to determine if they are ready to bulk material at low cost. It is 

recommended to identify new sources of supply in the international market 

to drive economies of scale. 

A change financial management program must be planned to help the 

acquisition deal go smoothly with the equal support of employees. Change 

management enable employees of both the organizations to accept the 

changes taking place in their job projects and the group they are working 

with. Change management becomes more essential for Suntory and Distill 

as firms are operating in different parts of the world (Hopkins, 2002). The 

culture, beliefs and values are altogether different. It is also possible that 

some employees from both sides resist changes as they are used with 

existing projects and groups. In this case, outside consultancies should be 

contacted to guide and support employees to accept changes. 

1.3 Evaluate the relative importance of the key 

elements in a successful M&A and Private 

Equity transaction 

There are key elements specific to every deal and organisation to support 

large transactions. The acquisition deal must be supported by predefined 

strategies and objectives, so that it results into overall improvements. 

Below are discussed some of the key elements that must be taken care of for 

the success of the acquisition deal – 


Improve competitive behavior – Suntory is acquiring a brand which 

has its own established market on the global platform. Distill has its own 

product portfolio which has been developed through extensive research and 

development over the time period (Schuler & Jackson, 2001). Thus Suntory 

must develop those brands in its existing market, so that it earns more sales 

and profit. In addition to this, it distributes and market own products in the 

existing market of Distill. 

Transformation deal – The acquisition must not be limited only to the 

expansion of product portfolio and profit maximization. Rather, it should 

define strategies to transform the entire organisation and restructure its 

functions. This is important to charge and encourage the workforce to 

contribute towards the progress of the organisation (Hijzen, Görg & 

Manchin, 2008). Employees working under the same boss and on the same 

projects get bored and this is one of the reason they change employer. This 

can be controlled through acquisition deal through job rotation and change 

of work groups. 

Leverage economies of scale – Suntory after acquiring the Distill will 

require additional raw material and unfinished goods to support the 

requirement. This situation can be dealt by leveraging the economies of 

scale offered by existing suppliers. Other than this, new suppliers can be 

contacted who are in the establishment phase (Weihrich & Koontz, 2005). 

This will support the company to control the cost while producing and 

selling more at the same time. 

Reach new markets – The expanded firm must develop its goals and 

target new markets to establish competitive advantage and gain early share. 

The firm will have huge product portfolio to be offered to the new 

customers. 


Develop Capacity – An important key success element for Suntory would 

be remove excess capacity which is not generating any revenue. On the 

other hand, it must also focus on expanding those business areas that are 

contributing to more revenue (Robinson & Harris, 2000). This way the new 

firm will be able to optimize the functions and operations. 

Global employee management – Human resources in present time are 

the most important part of the organisation, as they contribute effectively 

in the success and progress by leveraging the capacity of physical resources 

(Moeller & Schlingemann, 2005). The expanded Suntory after the 

acquisition of Distill should deploy employees at various global locations to 

further support in the business development. 

Task 2 Maximum price to pay & justify 

Recommendation 

2.1 Understand how to value a target company 

for an acquisition transaction 

An important part of the business valuation is its financial performance 

which reveals the result of the strategies and decision making ability of the 

management. The financial performance of Distill is evaluated with the 

help of annual results of last three years (Hijzen, Görg & Manchin, 2008). 

Below is provided a table that provides analysis of profitability and liquidity 

position of the company. 


Table 1: Finance Performance of Distill 

Amount in GBP Million 2012 2013 2014 

Cost of Sales 77.27% 76.83% 76.09% 

Gross Profit 22.73% 23.17% 23.91% 

Operating Profit -9.45% -16.35 -15.26 

Net Profit -10.94% -19.5 -16.3 

Current Ratio 0.94 1.53 2.45 


Receivables Turnover 3.92 4.89 5.56 

Inventory Turnover 7.72 8.37 8.61 

Fixed Assets Turnover 172.83 184.63 185 

Revenue % 

Year over Year -20 -17.36 -36.46 

3-Year Average -8.38 -23.08 -25.11 

5-Year Average 7.1 -1.55 -16.58 

10-Year Average 14.87 9.63 2.8 

Taking into consideration the profitability data, the table clearly shows that 

cost of revenue is tightly controlled and maintained in the last three years. 

This supported increase in gross profit over the same time period. The cost 

percentage was 77.27% in 2012 which improved and reduced to 76.09% in 

2014. The gross profit which was 22.73% in 2012, increased to 23.91% in 


2014. So there is a direct relation between cost and gross profit of the 

company. Taking into account the revenue, it is going in the negative 

direction from last three years. The three year average was -8.38% in 2012, 

increasing to 36.46% in 2014. Five year average also reveals the same 

evaluation and is contributing to loss year over year. The 10 year average is 

again all time low (Rossi & Volpin, 2004). The operating profit although 

gains support from the cost and gross profit margins and has been 

improved slightly from last year, but are still in negative. Net profit of 

Distill was -10.94% in 2012 which increased to -19.5% in 2013, but 

controlled to -16.3% in 2014. This is supported by the improved operating 

margins and lower sales and administration cost. 

Read more about : International Human Resource Management 

Furthermore, the liquidity position of the company is improved despite 

negative profits. The current ratio as calculated through current assets and 

liabilities was 0.94 in 2012. The ratio improved to 1.53 in 2013 and to 2.45 

in 2014. The increase in ratio is the result of excess funds raised by Distill 

earlier in this year. A notable thing in this regard is that market forces are 

still positive about the future prospects of the company. Despite all time 

negative sales and profits, the ability of the management reveals in the fund 

raising (Slack, Comtois and McCalla, 2002). This excess cash has been 

raised to support the need for market expansion and product development. 

Thus Suntory will have both physical and human resources to leverage the 

benefits and gain through the ability and skills. The cost and sales aspect is 

also important and reveals the ability of the management in controlling it 

up to the certain level (Rigby & Bilodeau, 2007). This also shows the skills 

and contribution of the workforce which have been working towards the 


progress and betterment of the organisation. In many case, when firms are 

moving to negative results, often shareholders and employees ditch at the 

first place. 

2.2 Critical analysis of comparative issues in 

M&A and Private Equity 

In business environment, huge deals that involve amalgamation of two 

companies are not isolated from issues. As both Suntory and Distill are 

based in different countries, it is likely that there were some issues that 

affect before and after the organisation functioning. It is thus essential that 

the management of both the organisations need to identify the issues that 

are existing and that may affect after the acquisition (DePamphilis, 2009). 

Following are discussed some critical issues that may affect the potential 

deal and the functioning in future – 

 

 

Culture – No two have the same type of organizational culture and 

behavior. Moreover, employees working with one organisation for long get 

used to it. Thus, it is here important that the management should decide on 

the continuation of the particular type of culture after the acquisition. 

Employee management – Another issue that may affect the business is 

the employee management style and leadership. Like organizational 

culture, there is also huge difference in the management style and 

leadership of both the organisations (Cartwright and Cooper, 2012). If 

these issues are not dealt carefully, it is possible that it affects the capability 

of the enterprise. 


Recommendation for the deal 

The above strategic and financial evaluation of Distill carried out to judge 

the feasibility of the potential acquisition by Suntory. From the strategic 

analysis, it has been analyzed that despite poor financial performance year 

over year from the last four years, the management and the market forces 

are still positive about the company prospects. The shareholders and 

investors provided huge funds for the new projects (Moeller & 

Schlingemann, 2005). The decision making ability of the management 

proved successful and is resulting into improving sales figures and cost 

control. This justifies that future prospects of Distill look promising and 

will definitely generate results. Acquisition of Distill will provide Suntory 

with the expanded catalog that has built its brand image in the market. 

Along with this, the third party brand catalog will also add to the existing 

portfolio of Suntory (Rigby & Bilodeau, 2007). Apart from this, Suntory will 

also benefit from the skilled human force which is contribution effectively 

towards the progress of the company. In addition to this, Suntory will also 

gain from the existing market reputation of Distill. Both the companies are 

operating on the global level, but they have their own markets in which they 

have occupied huge and increasing share year over year (Hijzen, Görg & 

Manchin, 2008). Thus Suntory will be able to market its own brands in the 

existing and high performing markets of Distill. 

Conclusion 

From the above report, it can be concluded that acquisition of Distill by 

Suntory will proved to be beneficial for both the companies. The report 

provides a strategic and financial performance analysis of Distill from the 


point of Suntory (Hopkins, 2002). Financial evaluation of Distill is based 

on past three year annual data. In addition to this, decision making ability 

of the management of Distill is also discussed which shows that despite 

negative performance, the skilled workforce is able to work towards the 

betterment of the organisation.

Business Establishment Assignment 21.07

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