Suntory Yakushi-do shrine

Merger negotiations between Kirin and the smaller, family-owned Suntory, Japan competitors in the beer and beverage business, have broken off, apparently permanently.

The parties ultimately disagreed on the share ratio and the extent of the role that the Saji and Torii families, descendants of the Suntory founder and owners of 90 percent of its stock, would play in management of the combined entity. See Kirin, Suntory End Merger Talks

Most news reports are treating this as a tragedy. My own view is different. In fact, it may be great for both. While I have met members of the Suntory families and I’ve had dealings with various companies of the Mitsubishi Group, owners of Kirin, I have no personal knowledge of their thoughts, other than from my experience with family-owned companies, public companies and the merger game.

Certainly it is natural for Kirin to feel that it should dominate the entity, because on an asset basis, it was more than twice the size of Suntory and it has responsibilities and an earnings agenda stemming from its being a publicly listed company. See Kirin, Suntory scrap merger / Beverage makers drop integration plans after talks collapse.

Suntory, on the other hand, was adamant that its founding families should continue to play a significant role in decisions. Reportedly, it not only wanted a higher than one-third share of equity, in order to have veto power over key decisions, but also felt that the families deserved a significant role in management. With its sales almost 70 percent of Kirin’s and nearly 60 percent as much profit, its reasoning was fairly understandable. Promising Merger Ran Aground On Issue Of Value

I’ve personally worked on over 125 mergers and joint venture projects, Studies show that mergers succeed in their objectives only about one-third of the time, and that includes joint ventures created for definite periods. Indeed, even one of the very most successful joint ventures in Japan, in which Mitsubishi was a party (and I was personally involved), Mitsubishi-Monsanto Kasei KK, was an excellent partnership that lasted almost thirty years but ultimately was unwound. Thus I do not assume that the benefits of a Kirin-Suntory merger would be as certain as many suggest. In fact, the termination of negotiations may reflect an understanding of the cost-benefit realities.