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Thus Kraft have succeeded in their bid for UK based Cadbury. I'm not an investment banker or analyst - just a humble change management specialist - but I don't understand this one. CEO Irene Rosenfeld, brought in 3 years ago to revitalise a stagnant debt laden Kraft has up to the current point primarily based her strategy to extend profitability and sales by boosting innovation and marketing. Cadbury on the opposite hand are showing a vi% year on year sales growth and a Pre Tax Profit growth of 30% over the past four years. Clearly a very well run company. Underperforming Kraft, already carrying large ?22bn debt (a legacy of the infamous Nabisco deal I marvel?) will increase that debt by a further ?7bn to pay a premium of twenty% in excess of the Cadbury share worth over the past five years, and what amounts to a premium of 40% in far more than Cadbury's share worth over the past a pair of years. That is a premium of between ?1.9bn and ?3.3bn. Therefore what I need to understand is how Rosenfeld plans to unlock Kraft shareholder worth in way over that? As way as I will see, the "deal logic" is based on increasing Kraft's international presence, notably in fast-growing emerging markets; and increasing market share within the confectionery sector which is reckoned to be one amongst the fastest growing segments of the whole food industry. But I would love somebody to explain to me how paying over the percentages to shop for market share and penetration makes long run commercial sense? On condition that over fifty% of these deals neutralise or destroy shareholder value the percentages are not good. Apparently Kraft reckon they'll strip out ?400m to ?600m in cost. However that hardly justifies the deal at that value and will surely depend on a fast and successful integration and to some extent the cultural fit between the management and marketeers of the 2 companies? From a amendment management perspective, given that the cultures of the 2 firms are thus very completely different and as long as the expansion strategy of innovation and marketing is entirely hooked in to the management and marketeers, the "people factor" and "cultural work" will be a crucial element in this growth strategy working. In my view: "Any proposed merger or acquisition where administrators have failed to spot and quantify the impact on those folks most stricken by it carries a high risk of failure. The numbers could build sense however have the political and cultural factors been assessed?" Cadbury shareholders should be delighted with the deal. Professional advisors and investment bankers concerned during this are having a terribly happy start to the New Year. From a UK perspective its also fascinating to determine Government owned RBS together of those concerned in putting up the debt finance. It will be very interesting to determine if Kraft shareholders are delighted over the next a pair of-three years, and if this deal very does increase Kraft shareholder value? However, Warren Buffet is a shareholder in Kraft, and presumably supported the bid, so he should apprehend one thing we have a tendency to don't...
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