Friday, December 19, 2008

Supply-Side Memo - Mergers & Acquisitions: Can the Virtuous Mouse and the Wealthy Elephant Live Happily Ever After?

What happens when small, iconic, socially-oriented companies like natural-specialty products industry leaders Ben & Jerry's (acquired by global giant Unilever), Stoneyfield Farm (purchased by international titan Groupe Danone) and Tom's of Maine (bought by global packaged goods leader Colgate) are acquired by large, multinational companies?

That very question, which the owners of smaller, socially-oriented companies ask themselves during the acquisition courtship process, as do all the stakeholders involved when such acquisitions occur -- suppliers to these companies, brokers, natural and specialty products retailers and others -- always ask, is also one two Harvard University Business School (HBS) professors recently asked themselves.

The two HBS professors, James E. Austin and Herman B. "Dutch" Leonard, recently examined the acquisitions of natural products icons Ben & Jerry's, Stoneyfield Farm and Tom's of Maine by the multinational consumer packaged goods corporations mentioned above, in a research project in which they asked this central question: "Can the virtuous mouse (the socially-conscious companies) and the wealthy elephant (the big guys) live happily ever after?"

"What happens when small iconic socially-oriented businesses are acquired by large corporations? Such mergers create significant opportunities for creating both business value and substantially expanded social value, but also pose unusually difficult challenges because the merging entities are often strikingly different in philosophy and operating styles as well as in scale," the Harvard researchers say.

In their research they examine Ben and Jerry's acquisition by Unilever, Stonyfield Farm by Groupe Danone, and Tom's of Maine by Colgate to ascertain what is distinctive about the merger process and to analyze the elements critical to success.

In their recent paper on the research, "The Surprisingly Successful Marriages of Multinationals and Social Brands," which was just published this week, the researchers say they also develop suggestions about how other companies considering similar arrangements might best manage the process of courtship, developing agreements, and executing effectively within the newly merged entities.

Based on their research of these three acquisitions, they find the marriage to have been beneficial to both the three smaller, iconic, socially-oriented natural products companies, as well as to the three acquiring global consumer packaged goods companies.

This is valuable information for smaller, iconic, socially-oriented companies in the natural and specialty foods segment internationally. It's also important information for all engaged in the various segments of the food and grocery business, particularly in the natural products segment.

Sara Jane Gilbert, a Web product manager at the Harvard Business School, recently conducted a Q&A interview with the authors of the research paper, James E. Austin and Herman B. Leonard, which she shares with Natural~Specialty Foods Memo. Readers interested in obtaining a copy of the 26 page paper can contact the authors by clicking on their linked names above.

You can read the Q&A conducted by Sara Jane Gilbert here. There's also an executive summary of the research paper, along with the Q&A, at the link.

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