Morrisons and Safeway (Section A)

The motives for takeovers and mergers and how these link with corporate strategy

Morrisons, which was mainly based in the North, wanted to access the South of the UK and Scotland; Safeway provided this opportunity as they accounted for 40% of total floor space in Scotland and established within the South 

Morrisons also wanted to increase market share within the UK to reduce the threat of themselves been acquired by a competitor 

The problems of takeovers and mergers including the difficulties integrating businesses successfully

Morrisons, due to the takeover, now reported their first ever loss of £313 million due to spending £3 billion on the takeover

In order to reduce costs, they cut staff working hours by 3% saving £90 million a year 

Safeway sales were down 7.2% but Morrisons sales grew by 9.2%

Taking into account the market share of each business before the takeover, the new business's market share fell from 14.8% to 14.1%

The factors influencing the success of takeovers and mergers

Morrisons were able to withstand the short term losses post-acquisition because they had a strong financial position 

Whether Morrisons can actually save up to £215 million each year in cost saving post-acquisition

The impact of takeovers and mergers on the performance of the businesses

The initial impact was disappointing  because Safeway had just changed their accounting system 6 weeks before 

Between 2005 and 2006 there was a substantial increase in sales revenue from £4.9 billion to £12.1 billion - But pretax profits fell from £319.9 million to £193 million 

Morrisons reported their first even loss of £313 million (saw in 2006)

Not bothering during the last two bullet points :/ Sorry 

IAG and bmi (Section A)

The motives for takeovers and mergers and how these link with corporate strategy

IAG, in particular British Airways, were looking to increase their presence at Heathrow (UK's largest and busiest airport) 

It also allows IAG to accelerate their growth into emerging markets which are not yet served by other airlines which will also give them a competitive advantage 

The problems of takeovers and mergers including difficulties integrating businesses successfully

The ECC (European Competition Commission) said that the takeover would only be allowed if British Airways give up 14 slots out of the 56 that were available so that they didn't create a monopoly 

The factors influencing the success of takeovers and mergers

Whether the increase in slots would have any affect on performance - reduce capacity on other slots so less chance of delays 

Whether the 1,100 saved jobs can be integrated into the business effectively 

The impact of takeovers and mergers on the performance of the business

Although to early to make final decisions ...

The takeover has allowed IAG to increase the number of daily slots at Heathrow by 42 which gives them 53% of total slots whereas the nearest rivals Virgin, only have 3%

In the long term, IAG will be able to offer new destinations and routes which will help to attract new customers and therefore increase sales 

1,100 cabin crew, engineers and pilots will be transferred to IAG saving high quality jobs

IAG also acquired another 27 bmi planes which are being repainted as British Airways planes, taking their total to 266 planes

The impact on, and reaction of, stakeholders to takeovers and mergers 

Willie Walsh (CEO) has said that the takeover is beneficial for both Heathrow and London's economy 

Richard Branson, Virgin, is strongly against the takeover as it will mean that IAG will have 53% of Heathrow's daily slots whereas Virgin only have 3%

Branson also believes that it gives IAG an unfair advantage over other airlines including Virgin and also believes that the remaining 14 slots should not be sold separately to individuals, but to a single airline otherwise it still benefits IAG

The reasons why governments might support or intervene in takeovers and mergers

The government may support the takeover as it will save 1,500 jobs (56%) of the jobs which would have been lost otherwise

Also IAG are looking to create jobs at it's engineering factory in Glasgow from 2014 while working with Rolls Royce which is also creating potential job opportunities 

Kraft and Cadbury (Section A)

The motives for takeovers and mergers and how these link with corporate strategy

Kraft wanted to create a 'global confectionery leader' and Cadbury offered Kraft growth in the UK as well as in emerging markets 


The takeover would allow Kraft to have a leader position in key developing markets including India, China, Mexico, Brazil and Russia 


Cadbury would help Kraft to achieve their growth targets of 5% 


It also allowed Kraft to have instant distributional channels (garages and petrol stations)

The problems of takeovers and mergers including difficulties integrating businesses successfully

Kraft's net profits fell by 24% to $540 million due to the costs of integrating Cadbury into the business

Most of Cadbury's senior management left

To finance to takeover, Kraft needed to borrow £7 billion 

The factors influencing the success of takeovers and mergers 

The takeover left Kraft with £22 billion of debt 


Many customers boycotted Cadbury's products 

The impact of takeovers and mergers on the performance of the business

Kraft cut 4,500 jobs due to job duplication


Kraft haven't renamed the Cadbury brand because it is already known and loved by millions across the world 


Disappointing results post takeover - sales increased by 30% by net profit fell by 24% 


Kraft were forced to increase prices to offset rising commodity costs in North America and Europe


Taking into account integration costs, the takeover knocked about 33% off Kraft's earnings per share 

The impact on, and reaction of, stakeholders to takeovers and mergers 

Cadbury's shareholders received a special 10pence dividend 


Two years later (2012) and Kraft's profits are falling and Cadbury's aren't performing as expected so stakeholders are wondering if it was the right deal?


Unions warned that up to 30,000 jobs could be lost due to the takeover - 2010 saw the closer of Somerdale Factory where 400 workers were made redundant 


Hostile reactions from employees, unions and local communities which was supported by the media 

The reasons why government might want to support or intervene in takeovers and mergers

Vince Cable claimed that the deal wasn't in the public's interest 


Gordon Brown hoped that the takeover would still allow the same level of investment into the business - especially when people are worried about the economy and unemployment


Unite (union) argued that Kraft's takeover of Cadbury's was purely driven by investors who had no long term interest in the business


At the same time, Kraft announced 4,500 job cuts 

Hope this helps, any additional information is welcome