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