Divide and merge. And then?

Once again, the cards are being reshuffled in the global CPG business: Ferrero is once again on a shopping spree and is now buying W.K. Kellog (after Nestlé's US confectionery business and Kellog's ice cream brands). This in turn was the result of the split of Kellog's into Kellanova and W.K. Kellog. At the same time, Kraft Heinz announced that it was splitting the company into a food company and a snack company. And you don't have to be a prophet to predict that one of the two will be taken over in turn.

Wharton professor Emilie Feldman describes the pattern: first, the company is broken down along the brand portfolio, always into two parts: One with brands that are growing fast, and one with brands that are growing slowly. The company with the slow-growing brands is then either acquired or merged. Meanwhile, the originally fast-growing part splits up again and the fun begins anew.

If you now (conservatively) calculate that companies need seven years to process acquisitions or mergers in such a way that they are operationally strong again, you can guess that things do not always end well - for the shareholders, the employees and also for the brands. After all, the key question is: why should brands that are only growing slowly or not at all suddenly take off with new ownership? The standard answers of "scaling and efficiency" certainly don't help here. No, the solution can only lie in brand management.

And in fact, it is regularly shown that some companies manage their brands much better than others: Specifically, Ferrero always manages to help brands achieve new growth. What do they do differently? Obviously, there is good brand management and not so good brand management. Companies that achieve high standards in brand management can also make acquisitions where the purchase price is higher than the fair value of the brand. But how high can the uplift be? This is a question we are always asking ourselves. Your thoughts and comments are more than welcome!

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