Last week, Carlsberg (🍺) agreed to buy Britvic (🧃) for £3.3 billion.
But a single line in a contract with PepsiCo (🥤) nearly tanked the whole deal.
Let me explain.
People didn’t understand why Carlsberg (known for, well… beer) wanted to buy Britvic (known for Fruit Shoot).
Young people *are* drinking less alcohol nowadays — so maybe Carlsberg wants to diversify.
But diversify into Robinsons orange squash? Maybe... I'm not sure.
Some people think the real reason Carlsberg wanted to buy Britvic was this: Britvic holds the exclusive license to make PepsiCo products in the UK and Ireland.
If you're in the UK and you buy Pepsi, 7up, Mountain Dew or Lipton Ice Tea, Britvic made it.
Now, that’s a *super* valuable contract for Britvic.
But here's the issue — the agreement between Britvic and PepsiCo contains a "change of control” clause.
This is how the clause works: if Britvic is bought by another company and undergoes a significant change in ownership (or “change of control”) then PepsiCo can terminate the contract.
Why does this clause exist?
It’s to protect PepsiCo — if a company it doesn’t trust takes over Britvic, PepsiCo might not have confidence in the new owner maintaining the quality it expects. So, if Britvic were to get bought, the clause gives PepsiCo the option to leave the agreement and find a new UK partner.
So, technically, if Carlsberg buys the company, PepsiCo can leave.
And that’s why PepsiCo was key to this deal — unless they agreed to keep the contract going with Carlsberg as the new owner, Carlsberg was *never* going to do the deal.
So what ended up happening?
Carlsberg convinced PepsiCo to waive their right to terminate the agreement! 🎉
PepsiCo agreed not to leave, Carlsberg made a £3.3 billion offer, and Britvic accepted it.
In any acquisition, the buyer’s lawyers spend ages checking the target company’s big contracts for “change of control” provisions.
Now you know why they’re so important.
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🐝Using Real Customer Insights to Grow Brands 👁️ | Ex-Amazon | Senior Director, Commercial at Streetbees
2moPowerful move Carlsberg Group, congrats on the Britvic plc deal