In September 2009 Kraft released details of its rejected Cadbury’s merger proposal. Kraft offered Cadbury a price above their share price, 90 day stock price and closing stock price-so why did it fail? The proposal provides some important points that shed light on why the merger failed and more importantly what small businesses can learn from this situation.
Value Your Partners
Kraft started with right idea, the proposal indicates the prices are 42% over the initial share price, 34% over the 90 day stock price and 31% over the closing stock price. With these figures, the natural question is why did the merger fail? Cadbury viewed Kraft’s offer as a smoke screen. Kraft failed to provide the necessary degree of professional respect for Cadbury’s market share and growth strategies. Small business’ thinking about merging or creating professional partnerships should approach potential partners as if they have the most knowledge in the situation, I call it the ‘courtesy genius effect’. Even if your target partner cannot see the big picture, give them your respect and acknowledgement of their successes.
Tell Your Partners What You Can Do For Them
Kraft offered to keep the Somerdale facility open and to invest int he Bournvile facility, but the gesture reads like an afterthought. Kraft should have emphasized why the acquisition of these two facilities were attractive to them and how they could continue to support them.
Acknowledge A Potential Partner’s Success
Kraft acknowledged their attraction to Cadbury’s iconic brands: the Creme Egg, Cadbury Roses, Schweppes and Bubblicious. Their mistake was acknowledging the attraction and then trying to beat it with their brands. By failing to acknowledge Cadbury’s success, Kraft completely dissolved any goodwill that could have been created out of mutual respect.
Partnerships and mergers represent a powerful business tool with the potential to create an alternative avenue to success for a small businesses. For mergers and partnerships to be successful, you must bring as much to the table as you request. Avoid Kraft’s mistakes and create a relationship based on value, strengths and growth.