Teaching strategy - Cadbury and why takeovers rarely work

The Kraft / Cadbury takeover is proving a rich source of teaching material for business studies in 2010, and here is a good example of how the story can be linked to the general issue of growth strategy via takeovers.

Jeremy Warner (formerly of the Independent) is well worth reading in the Telegraph each day. And he has written a timely piece on the likely result of Kraft / Cadbury takeover. Who are the likely winners from the deal? Nestle & Mars (who will probably gain market share as Cadbury struggles to come to terms with the new culture of Kraft) and the investment bankers and lawyers who have billed many millions of fees from the prolonged takeover battle.

There are some great quotes in Warners article.

I particularly liked this one:

“Most mega mergers are more the result of executive boredom, delusions of grandeur and the siren call of fee hungry investment bankers than compelling industrial logic”

Warner goes on to list some good examples for students of major acquisitions (often dressed up as “mergers”) which have gone on to destroy huge amounts of shareholder value. Well worth reading and possibly printing out for students to use at the start of a lesson on external growth strategy