Monday 12 May 2014

Life after a mega-merger – some pointers for NAMs

First, the basics…

Companies merge in order to release synergies and save costs. Anything other than a 50/50 split is a takeover, resulting in a faster rate of change and a little more bias in favour of the stronger party…

Logically, as a single, combined company they now need one head office and as much rationalisation of Production, Finance and Sales/Marketing as is feasible. Any obvious overlap of key staff will be eliminated, quickly or slowly, depending upon the new corporate culture. Depending upon the scale of the deal, government will interfere in any ‘vote-losing’ moves such as factory closures in high unemployment areas.

In the interest of abiding with competition legislation there will be an obligatory sell-off of brands that would otherwise result in dominance of a category in a manner that could cause issues with the government. This will result in windfall opportunities for brand acquisition by third parties…

The above description of the process may differ a little from the official press release at the time, but such is the nature of the real world…

However, from a NAMs point of view, the real issue is how to help retail customers to cope with the transition…

Action:
  1. Avoid possibility of cherry-picking of best terms and conditions by strong retail customers.
  2. It is vital to conduct a total re-assessment of relative competitive appeal for each of the company’s key categories.
  3. Given inevitable changes to the overall portfolio, it can be helpful to re-visit ways of growing the business.
  4. Helping the new company raise its share price via ROCE improvement provides a useful starting point for a pro-active NAM.
More details in the current subscriber edition of NamNews.

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