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there, remains a strategic opportunity with an embedded real option to expand (SWOT analysis -
Appendix 1) with detailed calculations in Appendix 4. The issue also has an embedded ethical
dilemma, dealt with separately in section 5 of this report. We evaluate this opportunity using Johnson,
Scholes and Wittington’s Suitability, Acceptability and Feasibility (SAF) framework:

Suitability: This is an organic entry as opposed to the SABMiller deal which is inorganic. Although our
past success has stemmed from M/As activities, it does not follow that we will not be able to execute

a direct entry. However, compared to inorganic entry, direct entry will hence take longer to achieve
our growth objectives. The biggest challenge is with knowledge of the Nigerian or African market.
Although the data points to the potential for us to enter and gain market share from the major players

(Heineken, SABMiller, and Nigeria Breweries), it will not be without a stiff challenge/fight back from
these players who have operated in this market for decades. Furthermore, it does not play into our
core strength of entering new markets via M/A strategies.

Investing in Nigeria, however, may result in political risks. For example, the current government may
be unstable (due to book haram security threats) and a change in government may see new
restrictions, such as limiting dividend remittances –we will need to assess the likelihood of this
happening. We will need to gain assurance that the neighboring countries (e.g. Ghana, Liberia) to

which we will also export the drinks batches remain economically stable and that the physical
infrastructure such as railways, roads and shipping channels are maintained in good repair. As much
as possible, we will want to ensure fiscal risks such as imposition of new taxes and limits on expenses
allowable for taxation purposes do not change. Currently, the taxes paid in Nigeria are higher than in

host country, Belgium, and even though the bilateral tax treaty exists between the countries, we should
be keen to ensure the tax rate does not change disadvantageously. We may also want to familiarize
ourselves with the regulations, safety, employment and any legal restrictions around land ownership.

Risks related to the differences in culture in the same country and neighboring ones is critical, some
of the countries in West Africa are majority Moslem and may frown at alcohol consumption. Care
should be taken however, not to over-emphasise these risks as these will also be applicable,

although to a lesser extent, should we enter this market through the SABMiller deal.

Acceptability: As per calculations in Appendix 6.1, the NPV of the project is + US$6billion, before

valuing the embedded real option to expand into the rest of Africa (note that all payments made
as part of initial investigations are sunk costs and hence not relevant to the NPV calculations).
The NPV amount, before taking into account the embedded real option to expand, is

approximately the breakup fee of US$6 billion we must incur to walk-away from the SABMiller
deal and pursue this route. The NPV calculation however, makes a number of assumptions
around revenues, inflation rates, exchange rates, prices, costs, value of land –sensitivity analysis

Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2018'
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