M&A Strategies are Evolving in Small Brand Acquisitions
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Big CPG companies have been focusing on growth through acquisitions the past few years. They see small brands as an opportunity to tap into a growing customer segment that they currently have little access to. However, the transition from a small brand into the big company structure can lose the “craft,” and “authentic” feel that makes those brands so successful. 2018 is the year when mergers and acquisitions teams will evolve and apply tactics that ensure the small brand keeps its quality and authentic feel.
How are Mergers & Acquisitions Tactics Evolving?
M&A teams are finally noticing that some of the small brand’s most loyal consumers see these deals as the brand “selling out to the man.” These loyal customers matter, because are typically the people that helped the company grow so fast. It is important for big CPG companies to keep brands “local” and maintain the product’s integrity after an acquisition. M&A Teams are focused on the following to keep small brands authentic feel:
- Keep the founder and initial innovator to maintain the appearance of a healthy marriage. This is important to building continued trust with loyal customers.
- Basing the purchase price on post-sale performance as well as making small investments in multiple small brands.
- Allow small brands to continue to operate independently by not buying them outright. Look at Mars’ recent investment in KIND.
- As soon as the sale is complete, both companies should be working together to tell the future plans for the brand. Look at how General Mills and Annie’s accomplished this over the years.
These Relationships are About Maintaining the Look and Feel
Risks in M&A exist for both the buyers and sellers. The small brands fear that the large company will ignore their mission and vision in pursuit of profits, and big companies fear they will never recoup a return on their investment. The M&A teams are telling both parties to focus on maintaining the look and feel of the brand. Keep the price the same, keep the packaging the same, keep the ingredients the same, at least for a little while. The bottom line here is if it ain’t broke, don’t fix it.
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