Mergers and Acquisition: Brief Analysis of Kraft and Cadbury

Kraft Food, Inc. (KFT) plays a dominant role in distributing manufactured goods to consumers worldwide. The company has provided consumers a plethora of products from dairy products to cookies to steak sauce. KFT prides itself on its overwhelming ability to diversify their products in an ever changing market. The organization understands consumer demands and quickly transitions to exceed consumer expectations. Their products appeal to every generation. KFT is the second largest food company in the world with annual revenues of $49 billion. KFT's global market positioning is #1 for products ranging from; biscuits, gum, chocolate, candy, and nuts. "Over the last several years, KFT has transformed its portfolio by expanding geographically and by building its presence in the fast-growing snacking category. A series of strategic acquisitions, notably of LUbiscuit from Danone and of Cadbury Plc, together with the strong organic growth of its Power Brands, have made Kraft Foods the world's leading snacks company. At the same time, the company has continued to invest in product quality, marketing and innovation behind its iconic North American brands, while implementing a series of cost management initiatives. As a result, the company has delivered a remarkable outcome in very challenging economic conditions" (PRNewswire, 2011).

The Kraft and Cadbury merger was a hostile horizontal acquisition. The very act of Kraft seeking to purchase Cadbury categorized the merger as a horizontal acquisition. Unfortunately the effort to conjoin forces was not without bickering among executives and hierarchical protests of why the deal should not take place. Nevertheless, advantages of the merger far exceeded the disadvantages. Cadbury, a British based organization wanted to keep the organization in the hands of British constituents. The organization feared that shifting power to a multinational company would contribute to massive job losses in the United Kingdom (U.K.) as a result of outsourcing and integrating a United States (U.S.) based work force. Kraft executives had to reassure Cadbury that the organization would maintain a "strong presence in Britain and would be a 'net importer' of jobs in the country" (Merced and Nicholson, 2010). In addition to blatant opposition of the acquisition, Cadbury executives considered the Kraft brand to be low performing compared to Cadbury who is loved by everyone according to Cadbury executives. Cadbury declined several offers from Kraft, however after grueling negotiation and term amendments Cadbury finally gave in to what appeared to be the best and only offer on the table at the time.