How to avoid being over-taken by a takeover…

By Brian Moore ([email protected]), Retail Consultant and CEO of EMR-NAMNEWS & KamCity.com

Given the failed attempt by Kraft-Heinz to takeover Unilever, proactive companies – and NAMs – are hopefully recovering from the wake-up call represented by a company making a bid for a £45.5bn company twice its size.  Whilst Unilever successfully repelled Kraft-Heinz, it is possible that they will end up selling off their foods division in order to satisfy the City…

More importantly, this bid has placed all companies in play re possible takeover.  In other words, in the current economic climate with access to low interest rates, no company is safe from predators that believe they can optimise company assets better than the current owners…

Moreover, given that a successful takeover usually has to result in the stripping out of overlap and duplication – ‘value release’ – in order to justify the acquisition price, it follows that the receiving end of a takeover can be a dangerous place…

Spectacular performers in the target company will no doubt be transferred to the winning side, but anyone of lesser status is vulnerable…

Finally, and it is often in the latter stages of a takeover, the consumer view is considered.  As headlines in the City pages filter into the consumer section of the media, the brand’s consumer is confronted with detail never intended for their eyes, often in stark contrast with the brand’s advertising message.

Think what the consumer makes of relative profitability of different brands (profit always looks excessive to a consumer), value to the company, optimising lifetime-value of consumers and the logic of factory shutdowns as each company strives to convince key stakeholders that their version of the company’s mission statement is best for all concerned…

Others can comment on the moral issues, promises made and possible fall-out, but given that takeovers are an inevitable result of flat-line demand and falling profitability, it may be more helpful to explore ways in which the team can help in making their company too successful i.e. too expensive, to buy, and in the process develop skills that help maintain growth momentum, but, if all else fails, are transferable.

It can be useful to begin by considering what comes out of a takeover process?  Given the ‘public’ access to the bid and rebuttal moves, and especially if a bid goes to arbitration, category dynamics and profitability norms are but a fraction of the insights available to those who study the details.  In addition, with the benefit of hindsight, it often becomes obvious that a category has reached sell-by, a business model has been superseded and a cherished route to consumer is now redundant.

In other words, taking an outsider’s view of the company assets and prospects can help the company consider steps that are not obvious to those that are too close to the business…

Clearly, given the benefits of a takeover attempt in terms of forcing the company to re-focus its thinking, it therefore might be beneficial to conduct a what-if on the possibility of being taken over, bearing in mind that any analysis has to compete with up to a year of preparation by the predator company prior to making the bid…

Under the ‘pressure’ of a theoretical takeover attempt, the company should task the team with answering the following questions, fast:

  • What business are we really in?
  • Where do we want to be?
  • Against what competition?
  • How fast do we want to go?
  • At what cost?
  • At what level of risk?
  • What mix of products is appropriate?
  • What mix of customers best helps us to meet our objectives?
  • What is the optimum channel mix?
  • If we were the predator company, what would we now change to justify the purchase price?

While competitors and customers are awaiting a return to normal, the proactive takeover target can take advantage of others’ inertia to redefine the company, it’s offering and implement a strategy that may not only save it from takeover, but also results in a leaner, fitter company tailored to the realities of these unprecedented times…Takeovers deliver a shock quite unlike the normal process of buying and selling, a concentration of mind that allows the company to contemplate a degree of change not permitted under normal circumstances.  The key is speed of response (Unilever’s achievement in preparing and delivering an effective rebuff within a four-week window was remarkable).

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