How Buyers (Unintentionally) Destroy Acquisition Value in Integration

Integration proves to be one of the most difficult pieces of the M&A puzzle to get right. Buyers often try integrating the target’s systems into their own, only to realize too late they are destroying the very value they wished to acquire.

Large food companies are learning this lesson from past mistakes and adjusting their integration strategies when it comes to acquiring small brands. The food industry has undergone a flurry of activity as large players seek to keep up with evolving consumer tastes by snapping up healthy, natural, and organic brands. Acquirers are finding these small, high-growth brands need more “tailored digitally focused advertising” than their big brand counterparts.

For example, Kellogg recently acquired Rxbar for $600 million and is determined to avoid the mistakes it made in acquiring Kashi back in 2000, which caused sales of the natural food brand to slump. Hershey, which acquired Amplify, the maker of Pirate’s Booty and SkinnyPop, for $1.6 billion has now established a hub for “emerging brands” that require a different strategy from Hershey’s core business.

When developing an integration plan the number one issue you should focus on is the acquisition strategy. In the case of Kellogg and Hershey, these companies are acquiring natural brands because of their popularity and strong growth among consumers even as sales of traditional CPG goods decline. Employing a different integration strategy that fosters rather than stifles the value of the brands is critical to success.

Returning to the strategic rationale of a deal to lay the foundation of the integration plan can help determine which functional areas to fold into your organization and which to leave alone. Remember, integration is not a one-way street where the seller must always adopt the buyer’s practice. Integration should not be about “winning” or “losing,” but rather determining the best outcome of the newly formed company post-acquisition. Moving forward both sides – buyer and seller – will be on the same team and together everyone will reap the rewards of success.

Photo credit: Original photo by Amtec Photos via Flickr CC BY-SA 2.0 with modifications by Capstone

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