Avoiding Merger Referral: A Discriminant Analysis Study of UK Alcoholic Beverage Firms

Whilst there is a significant body of economics literature that underpins anti-trust and merger policy it has not considered the impact of sequential mergers within the same industry and set of regulators. Consequently little is known about other factors that might influence the competition framework and indeed how this might influence industry structure and development over time. A longitudinal analysis of the mergers and acquisitions of the major UK alcoholic beverages firms over a thirty year period is presented to inform this debate. This industry was chosen because it has witnessed a significant number of investigations, both anti-trust and merger-related. Moreover, the period of investigation saw the emergence of Diageo as the world‟s largest spirits producer and Scottish & Newcastle as a major international brewer from what were a collection of 1960s UK regional brewing and pub retailing firms. Of the 40 significant transactions, 26 were UK specific, mainly brewing amalgamations with the remaining 14 mergers representing cross-border deals in the US and Europe. Discriminant analysis was applied to the dataset of qualitative and quantitative variables. The modelling confirmed the expected result that firms were able to maximise their chances of avoiding a costly and time-consuming merger referral by selecting targets in markets where they had no previous dominant share. However, the discriminant analysis also revealed that firms could reduce the likelihood of referral by exercising political influence and pursuing „agreed‟ rather than „hostile‟ bids