Question One: Why is Brown Forman considering buying Southern comfort? ?Brown-Forman Distillers Corporation is in a favourable financial position and is performing well relative to their competitor’s. In 1978, Brown-Forman holds a higher profit margin, higher growth rate and a higher anticipated return on sales for the remainder of 1978. According to the annual report for the 1978 financial year, the company highlighted that the business is in a positive position where the balance sheet shows strong results due to the asset management and their low debt/equity ratio.
Although the industry has faced a halt in sales growth, Brown-Forman is defying the odds of the market and is continuing to grow. These results exemplify that Brown-Forman are able to finance any acquisition and other investment opportunities, proving to be a perfect time to acquire Southern Comfort.Southern Comfort is viewed as unique liquor mixed by a secret formula which is exclusive to the owner’s of Southern Comfort producing a distinct flavour. Brown-Forman’s product-market philosophy is to only produce and sell high-quality products at premium prices, which are predominantly well known brands. Southern Comfort blends in with Brown-Forman’s philosophical view as it is a unique high quality product with a strong brand which has never been sold at a discount price by its manufacturer. The acquisition of Southern Comfort would assist in improving sales performance at Brown-Forman by increasing the product mix, adding product diversification and creating a competitive advantage.
Southern Comfort holds a strong presence in the foreign market with a 37.8% 5 year compound export growth rate in comparison to the domestic US and Canadian markets. Brown-Forman would benefit from the international market strength that Southern Comfort holds, assisting with their goal to penetrate the foreign market.
The acquisition of Southern Comfort would bring Brown-Forman a profitable asset as hey use modern…