Why AG Barr, the maker of biggest selling brand (Irn-Bru) merged with Britvic (The biggest supplier

Mergers

Table of Contents
Introduction.....................................................................................................................................3
Review of Literature........................................................................................................................4
Application of Theoretical perspectives to examine the business phenomena................................6
Evaluation of Resource based view theory on the merger case of AG BArr and Britvic...............8
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

INTRODUCTION
Combination of two of more companies in order to introduce a new venture in the market
is termed as merger. Looking at the competitiveness of present corporate market, it is important
for the companies to enhance their business operations and thus, mergers with large level
company or compatible firm helped the course of functioning and lead to generate desired
results. However, mergers assist companies to adjoin with other companies and avail them with
wide range of resources through the means of which competitive edge can be maintained and
enhanced.
Herein, researcher focuses on merger between AG Barr, the maker of biggest selling
brand (Irn-Bru) merged with Britvic (The biggest supplier of still soft drink in UK). By the
means of this research, investigator will concentrate on enhancing the knowledge and
understanding of readers and learners regarding the reasons due to which both companies
merged as well as the advantages attained by the Britvic Barr in Soft Drink industry.
Furthermore, future plans of Britvic Barr to sustain competitive advantage.
The companies behind this merger have agreed to a £1.4 billion merger which leads to
create one of the biggest soft drink firms in Europe. However, merger of Britvic and its Scottish
rival AG Barr formed the public entity named as Barr Britvic Soft Drinks which will bring
several portfolios of both the companies under one roof such as: Robinsons Barley Water, J2O
and Fruit shoot with Irn-Bru, Tizer and Rubicon as well as expected to generate annual sales of
more than £1.5 billion.
Apart from several benefits there are certain negative aspects that will be encouraged
during the course of merger such as: this merger will lead to cut the jobs of 350-500 employees
as company is striving to achieve annual savings of £35 million. But contradicting to this there
were several reasons behind the merger of these two soft drink giants (Barney and Clark, 2007).
Firstly, both companies understand that there was a high degree of complementarity between two
businesses, sales channel presence and geographic presence within UK. Secondly, managerial
level people of the both giants states that, there was relatively very little connection between the
portfolios of the companies which encouraged them to acquire additional resources and enhance
their market share within the target market of Europe. Thirdly, management of companies thinks
that through the means of this merger companies will benefited from each other’s
complementary sales and distribution networks which indeed enhance the reach towards market.

For instance, international presence of Britvic will assist AG Barr to enter into the markets of
France, The Republic of Ireland etc. Lastly, Board of Directors predicted that there would be
significant cost savings and revenue synergies. Furthermore, cost savings will assist company in
eliminating the duplication of corporate overheads and savings in procurement costs.
REVIEW OF LITERATURE
In accordance to the Nandy and Baag (2009) merger is the concept and technique that help
the business to grow. Merger is the process which is generally adopted by the business entities
often in order to perform the function at multinational level. It is the concept which is adopted by
the enterprises due to various reasons such as extend the market share and offer the wide range
of product to the customers. In certain cases the business unit like to join its hand with the other
business units to enhance their market position and improve the performance aspect which is
associated with it.
With the viewpoint of the Mathews, (2003) the merger is the process which is generally
adopted by the companies when they seek a downturn in their performance aspect and it can be
foreseen that they are losing their market share in the represent work environment in order for
the purpose top carry out the respective operations to meet the demand of the buyers. In order to
carry out the merger the acquiring company and the acquired company come together and decide
and execute the agreement between each other. After the merger is carried out the acquired
company losses its existence and the acquiring company survive.
According to Akrani, (2012) merger is the amalgamation of the two companies to form a
single business unit and serve the market over larger basis. It is the prospect which is adopted by
the companies to meet the demand of the customers and generate high revenues out of it. This is
the procedure which is generally adopted to compete with the other companies and build up
strong position in the marketplace. In accordance to the Nandy and Baag (2009) generally
merger is done in those circumstances in when the company or the business unit is facing huge
down turn and is not able to regain its position back due to which the performance aspect is
hindered at a greater extent.
According to Ravenscraft and Scherer, (2011) merger helps the different business unit to
enhance their position with the help of the other business to sharpen their focus by joining hands
with the other business unit. In the present scenario if the organization needs to sustain for a

longer period of time they have to adopt proper measure by diversifying in the product offering
to meet the demand in the market place. In such cases the business unit who operates over a
smaller scale try to merge with the business units which have the deeper market penetration to
perform the key operation and build strong position by meeting the demand of the customers
(FMGC, 2013).
There are different types of mergers which can be included by the business to grow and
expand in the business environment are discussed below:
Horizontal merger: It is the merger which is carried out with those companies who are
manufacturing the similar product and services to the customers in the similar market as a single
entity (Pilsbury and Meaney, 2009). The companies adopt the horizontal merger in order to
increase the revenue by offering the additional range of the product and services to the
customers.
Vertical merger: It refers to the merger which is carried out between the manufacturer
and a supplier who manufacture different product and services. The vertical merger occur when
the companies try to reduce its production cost in order to increase the efficiency to generate
high profit against the offering which the business unit make within the market place (Pilsbury
and Meaney, 2009).
Market extension merger: This merger take place between two companies which deals
with the same product but in the different market in order to meet the demand of the customer in
an effective manner. It is generally adopted in order to access the greater market place to deal
with large number of customers (Ray, Barney and Muhanna, 2004).
Product extension merger: It is the merger which takes place between the organization
which deal with those product and services that are related to each other and operates in same
market. It is generally adopted in order to expand the customer base by making the offerings.
Conglomerate merger: This involves the combination of different corporations with the
involvement of the entirely different activities that are not related to each other.
Concentric merger: It is the merger which occurs within the companies who does not
offer similar product but operates in the same industry. In this the company serve the customers
with the combination of two different types of product and services.
AG Barr and Britvic are the soft drink manufacturing company which is listed in the
London stock exchange and operates over the large scale. In order to expand the business

boundaries it adopted the horizontal merger with each other as they offer the same product to the
customers. The main objective behind their merger was to generate revenue and ascertain that
both the companies that are AG Barr and Britvic effective generate the ample amount of profit in
an effective manner. Both the companies agreed to gain the ample growth with the help of the
similar offering of the product and services (Cameron, 2013).
According to Giessner and et.al. (2006) the companies restructured the entire function
after the process of merger in order to strengthen it position in more effective manner. Both the
companies created the healthy offering to the customer to meet the requirement of the customers
in an appropriate manner. It also ensured this that both AG Barr and Britvic provide the best
range of the soft drink to the customers.
As per the viewpoint of the Ravenscraft and Scherer (2011) the term merger can be
coined as a restructuring of the business to meet the trends and the demand of the customers.
With the proper reorganization of the different activities the entire functioning of AG Barr and
Britvic are modified in accordance to ensure that they are growing over the different
perspectives. Merger helped AG Barr and Britvic to develop at the greater perspective and run
for a longer period of time.
This merger helped AG Barr and Britvic to increase the revenue with the help of this they
generated a huge amount of profit against the offering which they were making to the customers.
In accordance to the Nandy and Baag (2009) the merger helped AG Barr and Britvic to make
investment to carry out the proper research in order to develop the entire working of the
organization in an effective manner. It helped AG Barr and Britvic to employ the efficiency to
meet the requirement of the customers and diversify as per their specification. This also
enhanced the proper planning which was carried out by the AG Barr and Britvic to cater the
greater market with the similar product that they were offering to the customers.
APPLICATION OF THEORETICAL PERSPECTIVES TO EXAMINE THE
BUSINESS PHENOMENA
In general resource base theory can be as the strategy that holds the assets of the company
as a primary input for overall strategic planning so that manager can be concentrate on achieving
the competitive advantage with the rare combination of the resources (Porter,2008). The main
purpose of this theory is to transform a short run competitive advantage into a sustained
competitive advantage by the means of resources that are heterogeneous in nature as well as not

perfectly mobilized. However, the principle of resource base theory assist in translating the
valuable resources that are unable to either imitated or substituted without the great deal of
efforts (Sirmon and Hitt,2003). In this regard, if companies are able to mobilize their resources
effectively then these can prove to be great help in attaining sustainability as well as above
average returns.
In context to the applicability of the resource based strategy, company’s aims at
achieving competitive edge by making optimum utilisation of available resources (Cruijssen,
2006). In this regard, resource based view assist in offering some insights about strategic
resources available to the company as well as what helps firm to generate the above average
return or profit.
In addition to it, according to the VRIN characteristics, achieving competitive advantage
through resource based vie leads to future sustainability (Smith and et.al, 2013). However, there
are several characteristics of VRIN such as: valuable, rare, inimitable and non-substitutable. Valuable: Company should possess resources which assist them in enabling value
creating strategy by either outperforming its art rivals or minimizing or mitigating its
weaknesses (Pepall, Richards and Norman, 2005). In this context, the costs associated
with the overall investment is not higher than the discounted future rents that company
has to spend in order to attain value creating strategy. Rare: In order to generate value, resources must possess rare definition of their own.
However, considering the perfectly competitive strategic factor market for a particular
resource, price of the available resource will clearly reflects the future profitability or
above average returns. Inimitable: Looking at the present competitive environment, if valuable resources is
managed and controlled by only one firm can lead to attain competitive edge within the
target market. Furthermore, the main advantage of approach is that if competitors are
unable to duplicate the same it may help the firm to maintain its sustainability for long
term periods.
 Non-Substitutable: Despite of having rare resources or potentially value creating strategy
as well as imperfectly imitable but having lack of sustainability may directly lead in
resulting zero economic profits. Furthermore, in case if competitors are able to counter

the value creating strategy of the firm than also it may create several issues and obstacles
for the company to generate above average returns.
Therefore, on the basis of above study it can be said that, an organisation should take care
of their available resources as well as make optimum utilisation of it so that valuable results and
outcomes can be generated (Dobson, Starkey and Richards, 2009). Furthermore, protecting or
procuring the resources which consist of above stated characteristics may help firm in improving
organisational performance. Contradicting to this it can be said that, each characteristic is
important for the resources of firm because individually each of them are unable to sustain the
competitive advantages.
EVALUATION OF RESOURCE BASED VIEW THEORY ON THE
MERGER CASE OF AG BARR AND BRITVIC
Considering the above study it has been analysed that, mergers are potential way
undertaken by the companies to enhance their market share, business volume and profitability.
However, other than this, resources play significant role in enhancing the performance of
business enterprise (Harding and Rovit, 2013). According to the present given case, top level
management of AG Barr and Britvic planned to carry out merger between two giants to become
the biggest and largest soft drink selling company within the Europe. In this context, on
November 14 2012, the boards of both the companies announced that they have agreed on the
terms and stipulations regarding merger. Furthermore, the merger resulted in Britvic with the
higher percent of shareholders holding around 63% while on the other hand, AG Barr
shareholders holding 37% of the issued share capital.
Looking at the increasing competition within the Soft drink industry it has become
important for the firms operating in to enhance their business operations by the means offering
quality of products and services so that they can maintain or even enhance the competitive edge
within the target market (Haines, 2013). Herein, researcher focuses on developing a hypothesis
through the means of which it can be analysed that whether the merger between two soft drink
giants was successful in attaining competitive edge within the target market. Following is the
hypothesis:
 Ha0: There is no significant impact of the merger between AG and Britvic on growth for
Barr Britvic Soft Drinks

 Ha1: There is significant impact of the merger between AG and Britvic on growth for
Barr Britvic Soft Drinks
On the basis of above defined hypothesis researcher focuses on evaluating and analysing
whether the planning of merger between AG Barr and Britvic helped the course of both
companies in obtaining the competitive, enhancing business volume and generating higher
profits (Harding and Rovit, 2013).
In this context, there were several expectation that, boards of both the firms were having
through the combination of both the companies which was named as Barr Britvic Soft Drinks
(Mathews, 2003). Firstly, the main purpose behind executing this merger was to become the
largest soft drink company in Europe. Along with this, expected to generate annual sales of more
than 1.5 billion and providing employment to more than 4300 people.
In addition to this, the boards of AG Barr and Britvic believe that the combined group
will possess an attractive portfolio of strong and differentiated brands which consist of Irn-Bru,
Robinsons, Fruit Shoot, J2O and Rubicon as well as the sub segments of the soft drinks within
the target market. However, managers of the both firms concentrating on creating value by
making optimum utilisation of available resources so that brand value and operational efficiency
can be promoted (Mathews, 2003). Company’s managerial level people thinks that merger will
provide suitable opportunity in order to achieve contribution of minimum 5 million from the
annual net sales synergies by making the utilisation of combined distribution channels, brand
portfolios and geographic presence will help the course of merged Barr Britvic Soft Drink
Company to establish its business operations within the target market in effective and efficient
manner.
In context to the resource based view theory, top level management of Barr Britvic Soft
Drink Company can attain competitive edge by focusing on making appropriate and suitable use
of available resources (Ahern and Harford, 2014). Therefore, after the merger it is important for
the management of the company to focus on all those resources which helps in generating above
average returns. Considering the present portfolios of the companies there are several which are
valuable enough to generate desired results and outcomes. However, Irn-Bru, Robinsons are such
products which does not require higher investment and with the help of combined distribution
channels and the international present of Britvic will assist the course of merged firm to attain
higher revenues.

There are several benefits that AG Barr and Britvic Soft Drink Company attained after
getting merged as they were able to produce well-known brands as Robinsons, Irn Bru and
Tango (Britvic plc, 2012). Along with this, it also helped the boards of both the companies to
attain the license of producing Pepsi and 7UP from Pepsico. In such a competitive environment
these benefits assisted company to establish its new portfolios in effective and efficient manner
as well as in generating higher revenues to through enhance international reach of the products.
By the means of this merger, top level management aims at reducing the risk during the
integration by making suitable and reliable strategies and tactics to make the use of different
resources in effective manner (den Hertog, van der AA and de Jong, 2010). However, this
merger will assist in minimizing the disruption of business activities and define right platform to
the AG Barr group to enhance its business operations to international market and generate higher
profitability. It will also provide opportunities to the employees of AG Barr group to utilise the
Britvic core systems such as capacity and quality to enhance their level of performance as well as
generate desired results for the company. Boards of the companies assigned dedicated integration
team to manage and control the integration process to the best capabilities of both the business.
In this context, there are several synergy opportunities available to the management so
that they can attain competitive advantage within the target market as well as meet the changing
expectations of the customers (Neville, 2013). However, management understands that in order
maintain the sustainability within the target market both companies have to merge their
portfolios so that reducing costs of distribution channel, increasing reach in the market etc. will
leads to better results in near future. Combination of the both firm is stronger as compared to the
competition available within the European market. Further, it benefits Barr Britvic Soft Drink
Company to develop stronger soft drink growth platform, healthy long term capital structure,
involving skilled personnel of both the companies to work together and generate valuable and
desired results (Matsusaka and Nanda, 2002).
In consideration to the wide range of portfolio that Barr Britvic Soft Drink Company
provides to a customer which is rare in nature and it is one of the major characteristic that
resource of cited merged company should possess (Sirmon and Hitt, 2003). Looking at the
present condition of Barr Britvic Soft Drink Company it can be said that, there are wide range of
products and services that company should present to its customer base so that their constantly
changing needs and wants can be satisfied in effective manner.

Stakeholders are considered as the integral part of the business because they are one
through the help of which help of company irrespective to its sector execute business operations
in effective and efficient manner and generate desired results. Similarly, Barr Britvic Soft Drink
Company also possesses responsibilities of several stakeholders that need to be carried out in
effective manner so that establishment of new merged company can be done in suitable and
reliable manner (Ahern and Harford, 2014). However, merger helped in creating stakeholder
value by building stronger business with more growth opportunities, important collaborations for
the betterment of future as well as defining clear vision and strategy as per the needs and wants
of stakeholders and lastly, creating value for money of the stakeholders.
Therefore, in context to the resource based view theory it is important for the top level
management of Barr Britvic Soft Drink Company to take care of available resources and train
employees to make the best possible use of the resources so that demand of customers can be
met effectively (Kaviraj, 2014). However, in order to cover all the aspects of VRIN
characteristics it is important for the senior authority of Barr Britvic Soft Drink Company to
protect and procure resources so that overall performance of the firm can be enhanced in
appropriate manner. Further, by the means of this cited firm can attain competitive advantage as
well as establish its position in international market. Managerial level people of the both giants
state that, there was relatively very little connection between the portfolios of the companies
which encouraged them to acquire additional resources and enhance their market share within
the target market of Europe (Postema, Goppelsroeder and Bergeijk, 2006). Despite of all
increasing competition is one of the major issues that company is facing and it is essential for the
top level management to make sure that they develop value creating strategy otherwise in case if
competitors are able to counter the value creating strategy of the Barr Britvic Soft Drink
Company that also it may create several issues and obstacles for the top level management to
generate above average returns.
From the analysis carried above the merger of both the organizations that is AG Barr and
Britvic international has been beneficial for both the organization. This is because it has provided
them competitive advantage in the market with which they can survive for longer course of time.
High degree of complementarily can be viewed between the two businesses (Kristandl and
Bontis, 2007). With the merger the small company AG Barr has got benefits from merger with
giant brand. The customer base of the company has increased significantly. Moreover the

organizations have increased their geographic presence in an effective manner. It has been
viewed that there has been little overlap among the brand portfolios of both the companies.
Further with the merger the combined business have attractive portfolio of strong as well as
differentiated brands.
It has been inferred that with the assistance of merger the two companies have got
benefited from the one another's complementary sales as well as distribution network that has
permitted increased routes to the market. This has greater role in increasing the revenue of both
the organizations (Matsusaka and Nanda, 2002). The presence of Britvic international in France,
the republic of Ireland and in other countries has assisted AG Barr to increase its international
distribution in an effective manner. This has resulted in increasing the image of the brand in the
market. Moreover it has been gained that with merger cost saving has been done and revenue has
started to synergies. With the assistance of cost saving duplicated corporate overheads have
started to get eliminate (Rhodes–Kropf, Robinson and Viswanathan, 2005). Combined
operations have also helped in providing benefits related with manufacturing and logistics
efficiencies. Increase in revenue is due to the reason of utilization of combined distribution
channels, brand portfolios as well as geographic presence of the merged entities. It has been
determined that profits in future will increase to a greater extent.
CONCLUSION
From this report it can be interpreted that the business require the proper procedure to help
the AG Barr and Britvic to successfully run the entire operations and generate the ample amount
of profit by serving the large customer base in an appropriate manner. With the help of merger
the entire performance aspects which are associated with AG Barr and Britvic helped them to
attain the competitive advantage with the increase in the market share. Further in this report it
can also be concluded that both the companies effectively held the various issues which were
encountered during the merger and after it. The risk which were associated with AG Barr and
Britvic were also reduced to a greater extend as the flows were meet up after the horizontal
merger of the companies. The planning aspect related to merger between AG Barr and Britvic
helped the course of both companies in obtaining the competitive, enhancing business volume
and generating higher profits. With the merger both the companies were equally benefited and
helped AG Barr and Britvic to expand their customer base by offering one additional unit of
product and services to the customers.

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