Growth Through Acquisition
Mondelez International is one of the largest confectionery, food, and beverage company based in USA. This company has an annual revenue of about $26 billion in 2018 and operates in approximately 160 countries.
This company manufactures chocolate, cookies, gum, confectionery, and powdered beverages. Mondelez International’s portfolio includes several billion-dollar brands such as Belvita, Chips Ahoy!, Nabisco, Oreo, Ritz, TUC, Triscuit, LU, Barni, Milka,Toblerone,Cadbury,Freia,Marabou, Trident, Dentyne, Chiclets, Halls, Stride and Tang.
Growth Through Acquisition
Growth through acquisition is one of the strategies for diversification and market positioning. Practiced by successful companies at all levels, growth through acquisition helps in securing more market share, man force and revenue. A tool of market consolidation, it offers the acquiring company a chance to consolidate its hold and keep market dominance. An important principle of market economy, growth through acquisition not only propels a company to a major position, but also earns rich dividend for share holders of the acquired company. Its importance is demonstrated from the fact that nowadays various companies are on acquisition spree worldwide to grow their market revenue
One of Mondelez strategy is growth by some acquisition. It’s showed from several acquisition they made. Some of big company the acquired, such as; Nabisco, Toblerone, Danone Biscuit and Cadburry.
In 2016, Mondelez has acquired the remaining 20% stake in Vietnam-based Kinh Do Corp for VND2tn ($90m). In November 2014, Kido sold an 80% stake to Mondelez for $370m. Mondelez completely owns the Kinh Do Corp snack unit and the acquisition will help the American confectioner to strengthen its presence in the Vietnamese market. Kinh Do is known for its confectionary products such as biscuits, soft cakes and seasonal moon cakes in the South-East Asian market.
In 2018, Mondelēz International announced an agreement with The Riverside Company, a global private equity firm, and other shareholders, including Founder Kathleen King, to acquire Tate’s Bake Shop for approximately $500 million. Known for its signature thin-and-crispy cookies with simple, authentic, high-quality ingredients, Tate’s is a fast growing, premium cookie and baked goods brand
Meaning of Growth Through Acquisition
The rising importance of growth through acquisition is demonstrated from the fact that it has decimated political and geographical boundaries and become a worldwide phenomenon. Growth through acquisition refers to acquisitions of one company by another. It can be merger or taking over of control. Growth through acquisition is categorized into three areas, upstream, downstream, or lateral. In upstream acquisition, a smaller company in order to ensure market consolidation seek merger with a bigger company operating in the same field on the basis certain conditions. The aim of such merger is to secure employees, ensure greater investment and consolidate market forces. In this growth through acquisition strategy the policies made by consent prevails and both work as one entity. In a downstream acquisition process, one firm acquires the other to expand its business. In such cases usually, a bigger company acquires the smaller ones. This merger was through purchase of shares and the management and the control passes over the acquiring firm. No doubt this helps in growth through acquisition, but the acquiring company only prevails and the employees, market, brand name and even existence of the acquired company is decided by the former. The growth through acquisition strategy also recognizes lateral acquisitions. The aim of such merger is common objective to pool resources.
Problems in Growth Through Acquisition
The growth through acquisition strategy is always prone to problems. Absorbing a new firm poses many barriers, such as lack of due diligence, poor matchmaking, miscalculations during the transition, and conflict between the management and the workers. Newly acquired human resource can be reactive to harsh decisions of the new management and remain apprehensive of the objective of growth through acquisition strategy. The acquired clients usually refrain from committing new projects unless persuaded and their confidence is gained. Variations in the style of working may create golf between management and workers or clients and the acquiring firm. Sometimes sellers may use the finances acquired from the takeover to prop up new competitors or help the existing ones. These problems can be taken care of by having prior agreements and astute analysis of risk factors.
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