Nestle - Mergers and Divestitures - 1997-2007

Mint 24 July 2007 Pages 1 and 24

Brand Cut: After the bings, Nestle on a diet.

Nestle SA CEO Peter Brabeck made two troubling discoveries last year: They were turning out 130,000 variations of their brands, and 30% weren't making money.

After 10 years growth, CEO feels Nestle became unwieldy and slow. Now he is pushing an aggressive plan to jettison weaker brands and simplify the organisation.

Nestle's acquisitions amount to $39.4 billion and divestitures to $5.28 billion during 1997-2007.

some major deals

year acquired company value of acquisition (bil)

2001 Ralston Purina pet food $13
2002 Dreyer's Ice Cream (Part share) 7.9
Chef America snack foods
2003 Powwow water;
Movenpick ice cream 0.8
2005 Remaining portion of Dreyer's 3.0
2006 Novartis's nutrition business
Jenny Craig diet products 4.0
2007 Gerber baby foods 5.6


Nestle cut about 50 of its 1,200 subsidiaries worldwide. Barbeck says the company may eliminate more than 200, in the longer term.

Study of this company's acquisitions, divestitures and reorganisations can be a very useful and interesting case study.

M & A course 2007 June-Sep Case History Assignments

1. Tata-Corus
2. Hindalco-Novelis
3. Dr. Reddy’s-Beta Pharm
4. Mallya – White and Mackay
5. Suzlon-
6. Vodafone-Hutch Essar
7. Cement
8. Oracle – Iflex
9. Jet airways - Sahara
10. Franklin Templeton – Kothari Pioneer Mutual fund
11. Recent Acquisitions by CISCO
12. Recent Acquisitions by Merrill Lynch
13. Recent Acquisitions by GE
14. Vodafone-Mannesmandemag
15. Arcellor-Mittal
16. Grasim – L&T
17. Tata-VSNL
18. Holcim-ACC
19. Acquisitions by Ranbaxy
20. Arrangement between Mukesh Ambani and Anil Ambani and subsequent mergers and demergers

Areas to be covered as applicable

Initial contacts/discussions
Announcement
Valuation
Synergies claimed
Steps subsequent to announcement of the deal
Structuring of the deal
Financing of the deal
Closure of the deal
Subsequent performance
Advisors to the Buyer and Seller

M & A course 2007 June-Sep Session Sequence

Text; Weston, Mithcell and Mulherin


Ch.1. The Takeover Process
Ch.5. Strategic Processes
Ch.6.Theories of Mergers and Tender Offers
Ch.7. The Timing of Merger Activity
Ch.8. Empirical Tests of M & A Performance
Ch.11. corporate Restructuring and Divestiture
Ch.12. Empirical Tests of Corporate Restructuring and Divestitures
Ch.22. Implementation and Management Guides for M & As
Ch.9. Alternative Approaches to Valuation
Ch.10.Increasing the Value of the Organization
Merger and Takeover Mechanics in India
Ch.4. Deal Structuring
Ch.3. Accounting for M&As
Ch.17. International Takeovers and Restructuring
Ch.16. Going Private and Leveraged Buyouts
Ch.19. Takeover Defenses

Recommended for Additional Reading


For broadening the knowledge:


1. Wyatt & Kieso, Business Combinations: Planning and Action, International Text Book company, 1969
2. Weston & Samuel C. Weaver, Mergers and Acquisitions, Tata Mcgraw Hill, 2001
3. James W. Bradley and Donald H. Korn, Acquisition and Corporate Development, Lexington Books, D.C. Heath & Co., Lexington, 1981 ( a book by Arthur D. Little Executives)
4. P.S. Sudarsanam, The Essence of Mergers and Acquisitions, Prentice Hall of India Private Limited, New Delhi, 1997
5. Fred Weston et al., Takeovers, Restructuring, and Corporate governance, second edition

For deepening the knowledge

1. Book on Income tax of India,
2. Company Act of India,
3. Advanced Accounting by Maheshwari and Maheshwari
4. Valuation by Copeland,
5. Book on Joint Ventures by Yoz and Hamel,
6. M&A:A Practical Guide to Doing the Deal by Jeffrey Hooke,
7. Strategic Management:Concepts and Cases by Thompson and Strickland 13th edition, 8. Mergers et al, Issues, Implications, and Case Laws in Corporate Restructuring by S. Ramanujam.
9. Schweiger, David M., M&A Integration: A Framework fo Executives and Managers, McGraw-Hill, New York, 2002
10. Research papers given in the references by Weston, Mitchell and Mulherin