Sometimes, you can win by losing.

The Tennessee Whiskey Waltz played out earlier this year as liquor distributors jockeyed for position to acquire the assets of then-No. 2 distributor Allied Domecq. At the time, would-be buyers believed that Domecq's top-shelf brands were worth the costs associated with the acquisition.

U.S. giant Constellation Brands (NYSE:STZ) teamed up with Brown Forman (NYSE:BFB) and Motley Fool Income Investor selection Diageo (NYSE:DEO) to discuss a possible offer for the Allied assets, which included a considerable rack of wine brands, along with liquors like Stolichnaya, Kahlua, Malibu, and Courvoisier.

Yet French distributor PernodRicard, which was making a $14 billion bid in cooperation with Fortune Brands (NYSE:FO), bought off Diageo with a few shots of whiskey and a glass of wine. To ensure that the world's largest distributor did not use its financing leverage to assist other suitors in making a competing bid, Pernod gave Diageo its Bushmills brand of Irish whiskey and Allied's Montana wine collection. Constellation then withdrew from the bidding process for Allied, paving the way for Pernod's winning bid.

Even though it lost out on Allied Domecq, Constellation seems to be the better for it.

For example, with a debt-to-equity ratio of 104%, its financial position would have become more precarious, considering that Allied had an unfunded pension deficit approaching $800 million. Had its bid been successful, Allied would have risked reducing its debt rating to "junk" status to pay the tab. That's exactly what happened to Pernod; Standard & Poor's dropped its debt rating to BB -- that is, junk -- as its total debt swelled to more than $11 billion following the acquisition.

While Pernod says the acquisition is moving apace, it has had to take some one-time earnings hits in the process. It saw fit to increase marketing expenses by 13% to expand its brand awareness, as Europeans have apparently sobered to a slowing economy. It will also need to unload the Dunkin' Donuts and Baskin-Robbins food chains it acquired from Allied to help pay for the acquisition.

While Pernod saw net profits fall over 7% for the first six months of 2005 due to the acquisition, Constellation reported 45% growth in earnings per share last quarter. It's set to report second-quarter earnings next month. Yet those teetotaling Europeans could prove to be a problem in the second half for Constellation. The company derives some 43% of its revenues from international sources, and with consumption levels remaining relatively flat, domestic beer sales will be unable to make up the difference. Still, some analysts see a strong performance in the company's wine and liquor lines propelling overall growth 26% over the full year. Yesterday's selloff on those international fear factors could represent a buying opportunity for investors.

Pernod hopes the Allied acquisition will allow it to diversify away from Europe and into Asia and North America. However, it gave Fortune wine and spirit brands that were growing faster than Fortune's own brands, potentially doubling the company's sales in those segments. It was certainly not a losing acquisition for Pernod; sales from the five main acquired brands increased 3% compared to a 1% decline in the previous period. Nonetheless, despite losing out on this round, Constellation and even Diageo find themselves better off for still having a chance to dance another day.

Sip on these related Foolish articles:

Mathew Emmert's Motley Fool Income Investor newsletter service continues to beat the market with a team of selections that also pays substantial dividends. Get full access to all his picks with a free 30-day trial.

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. The Motley Fool has a disclosure policy.