Questions on Brown Forman's Takeover of Southern Comfort Corporation

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Brown Forman Case 1. Perform analysis on the historical financial statements of Brown Forman. Evaluate the financial health of Brown Forman. Here you should perform ratio and trend analysis, along with creating common-sized financial statements. Assess the overall financial health of Brown Forman prior to the proposed purchase of Southern Comfort. Brown-Forman is a leading producer, marketer and importer of wines and distilled spirits. The company was the fifth-largest distiller in the United States. However, the company's success will largely due to the massive amounts of advertising expenditures on their premium brands. The company spent significantly less on low profit brands and as a result the whiskey market declined. Their response was to move into faster growing product lines to alcoholic beverages and this analysis considers a horizontal acquisition of the Southern Comfort brand. There are many advantages that can be gained through this acquisition. One is that the company developed a distinctive brand with loyal customers and a brand that is growing faster than competitors in the same niche. Plus, liqueur found in the Southern Comfort beverage does not need to age and can be produced and sold much faster than the traditional whiskey line. Thus the company could use advertising to drive sales with the capacity to increase production as needed. However, Brown Forman wants $94.6m for the company but the book value in 1977 was $16.7m. Therefore, Southern Comfort

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