Merge and Acquisitions (M&As) are on a significant rise in the Consumer Goods (CG) industry. Last year, there were 50 acquisitions in the food and beverages category alone. Eight of those deals were over US$ 500m, including one above US$10,000m. The biggest was ThaiBev's US$ 11,200m purchase of Singapore's Fraser and Neave. Coca Cola had three large bottler mergers. Pringles business was acquired by Kellogg, VF acquired Timberland, Pfizer Nutrition was acquired by Nestle, SAB Miller bought the beer business from Fosters, the list goes on.
M&As are indicative of a larger trend sweeping business. This is best exemplified in the case of British American Tobacco's (BAT) acquisition of UK based CN Creative late last year. CN Creative is a manufacturer of electric, smokeless cigarettes. The acquisition was a quick way to access a new product that provides a safe alternative to BAT's customers. At the core of today's M&As is the need for balanced growth across geos, growth in product portfolios and often, simply to seize an opportunity rather than seed and hope for success in volatile markets.
It is almost impossible for IT organizations to be completely prepared for integration with the target company, especially on the scale and geographical spread we are witnessing today. As the acquisition size grows, the integration challenge is tougher. Given that most organizations don't go through a routine complexity reduction exercise, acquisitions are likely to bring in additional redundancies. Also, to unlock the full potential of an acquisition, speed of IT integration becomes critical. It isn't surprising, therefore, to see that CIOs in the Consumer Goods industry are spending a considerable amount of time designing and implementing architectures that will be scalable and set a foundation for quicker more successful M&A integration.
M&A playbooks need to be designed such that they can handle different types and sizes of acquisitions. For example, if the acquisition is going to be cross border, how are communication and cultural challenges managed? How are IT systems that help vendor collaboration going to be managed? If the acquisition is going to be on a large scale, across geos, what rules guide the retirement of proprietary technologies? How can SOA be leveraged to connect disparate systems from two different companies to make them work as one? Hardware, Software, and Service partner choices have to be made. How do you variabilize and simplify your IT landscape and create a platform for M&A or de-mergers.
If your technology partner in an M&A is able to work with a pre-cast playbook, has global expertise to weave together various components mentioned above, integration will be more predictable. It will stay on schedule and will deliver early all the business benefits from the M&A.