Author Question: Wine Distribution Merger Two of UK's larger wine distribution companies, Bibendum and PLB, merged ... (Read 107 times)

student77 · **on:** Jul 1, 2018

Wine Distribution Merger Two of UK's larger wine distribution companies, Bibendum and PLB, merged their businesses in October 2014 . Bibendum is primarily a restaurant supplier while PLB focuses on supplying wines to retailers. Does this suggest a mechanism through which the merger might create value?

Question 2

You can invest 100,000 into either project A or B. You estimate that A would succeed with a probability of 0.7 in which case it doubles in value. If it fails, its scrap value is 50,000 . Project B would succeed with probability 0.6, in which case it would have a value of 150,000 . If it fails, project B's scrap value is 30,000 . Which project should you invest in?
a. Project A
b. Project B
c. Neither of the projects
d. You cannot tell from the information presented

mmpiza · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

The merged firm could eke out some economies of scope from selling to the two customer types. There may or may not be synergies in marketing or delivering wines. However, many of the two customer types purchase the same wines. There are likely to be economies of scale in warehousing, storing and, perhaps, purchasing any specific wine label. These scale economies make serving the two markets less costly.

Answer to Question 2

a