Mergers And Acquisitions Essay Example | Topics and Well Written Essays - 2500 words

Mergers And Acquisitions - Essay Example The companies are keen to reach out to a global customer base in a bid to respond to the increased pressures of achieving scale (Finkelstein, 1999, pp.1). This is also one of the motives in the case of Kraft and Cadbury deal as it will open new markets for the company. A thorough analysis of this deal covering aspects like long term strategies, regulatory implications, financing, defence mechanisms etc has been presented in the paper. Strategy of Kraft Inc Recently there has been a spate of merger and acquisition activities across the globe with the ‘bidder’ taking advantage of the low ‘target’ valuation. Besides the low valuations the other incentives in a merger and acquisition deal are tapping developing markets, acquiring access to the customer base of the target company, capitalising on the good-will of the target, generating business synergies etc. The global growth strategy of Kraft Foods is also based on the aforementioned objectives. By way of this strategy the company is anticipating an organic growth in its revenue base by 5% or higher; accompanied by a growth of 9% to 11% in the earnings per share (EPS) placing it in a good stead in the worldwide food industry. Irene Rosenfeld, Kraft Foods Chairman & CEO, takes pride in the market positioning of the company which has now entrenched itself as â€Å"global snacks powerhouse† based on its unparalleled portfolio of leading local and regional brands. By virtue of this unique combination and its significant market presence in the emerging markets the company is expected to register a consistent growth. The global growth strategy has enabled Kraft to lay the foundation for strong growth. The company aims at taking its performance to a higher level by leveraging on its scale and investing strategically in sales, marketing, innovation and create a high-class cost-structure. The acquisition of Cadbury has made Kraft Food an undisputed leader in Snacks, a high-margin and high g rowth category which comprises more than fifty percent of the total revenue of the company. The Snacks portfolio of the company is complemented by iconic local and regional brands in grocery, cheese, beverage etc. A majority of these iconic heritage brands are placed in top positions and is the favourite of the consumers who tend to be extremely loyal towards these brands. They generate high margins and have robust cash flows. The popular heritage brands offer Kraft Inc the unique opportunity of investing profits from its stable cash rich businesses to fast growing and high margin yielding developing markets. Kraft and Cadbury combination offers the scale required to grow distribution and sales in existing and new markets. The company anticipates revenue synergies and cost synergies to the tune of $1 billion and $750 million by 2013. Based on its anticipated growth in EPS and organic revenue Kraft Inc aims at becoming a top-rung performer in the food industry (Kraft Foods Inc.-a, 20 10). Regulatory implications The takeover of Cadbury by Kraft has been spoiled by the controversy surrounding the closure of Somerdale factory thereby creating sentiments of mistrust in the manner the Kraft is held. Now the company faces a stiff challenge in restoring its image in UK. The evidences gathered from