The market is on the move. British brands have always been an attractive prospect for international investors and recent times have borne that out, as Unilever and Weetabix demonstrate. The conditions seems right for a flurry of M&A activity in the coming years, particularly from the States, but this raises a key question: how exactly do you get the most value for money from British brands?
The low thrum of M&A sound that is the constant background noise of business has begun to climb in pitch. This is due to a constellation of factors, including the weakened pound (and the strengthened dollar) that make American movement in the market particularly likely.
For the titans of the industry, acquisitions are a natural path for growth – AB Inbev will in all likelihood need another deal, even after its acquisition of SABMiller earlier in the year, to hit its US$100bn revenue goal by 2020.
We need not look very far for examples of the rising tempo of the consumer industry – the Kraft Heinz bid for Unilever is certainly the biggest, but from Reckitt Bensicker putting their French’s mustard brand on the market to Unilever selling their spreads business, there is ample evidence of a market undergoing change.
And it’s not just the titans of the industry either – LDC backed the secondary buyout of Walls owner Addo Food Group last week and US paint firm PPG has just upped its offer again for Dulux.
But there is danger as well as opportunity for the acquirers (as well as the acquirees). Culture matters. Though British brands are an easier fit and launch pad for global investors they still present unique challenges as well as massive opportunities. From a talent perspective, the task is one of finding the right leadership to leverage the enormous potential of British brand equity.
Weetabix has been through the full ownership experience of private equity (Lion Capital), Asian (Bright Foods) and now American (Post Holdings). The initial foreign investment, the largest overseas takeover by a Chinese company in the food and beverage sector, was a chance to expand internationally, with Bright Foods committed to investing in the long-term development of Weetabix – especially in Asia.
Though it benefitted from the growth of the cold cereal market in China, the country’s mornings are still dominated by hot breakfasts, making Post Holdings, as one analyst notes, a ‘much better fit’ for the company. Nevertheless, CEO Giles Turrell and his leadership team successfully mitigated the disappointing Asian expansion with a renewed focus on award-winning manufacturing. Whether Weetabix could have taken fuller advantage of the Chinese market with more culturally apt innovation or not, the case study warns brands to think through their international partners and the market they represent
Foreign firms are attracted by the strong heritage and institutionalised brand management common in the UK and, as Akeel Sachak, global head of consumer at Rothschild’s notes, from a cultural standpoint, American and Asian businesses tend to feel most comfortable starting their expansion into Europe here.
For those businesses that make sure that local talent forms an integral part of their strategy, success awaits.
Fortune 500 firm Jarden Corporation bought Oldham-based Pulse Home Products, the makers of Breville and Dirt Devil, in 2012 and rapidly expanded the company’s product line and geographic reach, effectively combining the business with its existing European infrastructure. The company ensured that much of the management team remained in place, integrating them and their experience with its larger European division.
Hain Celestial, the US parents of Hain Daniels, has been fuelling a highly acquisitive spree of brands. In the last few years, the business has acquired Ella’s Kitchen (2013), Tilda (2014), Orchard House Foods (2015), and the Yorkshire Provender soup brand in February this year.
Whilst a portfolio of impressive brands and clearly with a mission of intent, the cultural intergration of these individual businesses and how they expand will be interesting to observe.
The cultural gap between American and British companies is relatively small, but hiring local British and European talent still yields benefits. The uncertain regulatory environment of the future, particularly in light of Brexit, means that employing individuals who have strong experience of operating in the British and European market matters more than ever. Those who intimately know the retail landscape, cultural behaviours and consumer desires succeed hugely.
This is especially true if they see the UK as a springboard into Europe. Europe is culturally fragmented and, as brands who are expanding into Europe such as innocent have experienced, you have to hire talent who can tailor the brand to various continental cultures.
US business Amplify Snacks’ announcement recently to retain Tyrrell’s CEO, David Milner, following its acquisition is a wise move and will help build a strong platform to build into Europe.
This has been borne out well previously by the likes of the San Francisco brand Method who merged with the Belgian Ecover brand to collectively launch on either side of the Atlantic. Method saw increased distribution, awareness and revenue for the brand in the UK and Europe after the deal.
And it is important to bear in mind that just as foreign investment in Britain is echoed by British investment overseas, so there are benefits for both sides of an acquisition. For brands acquired by American companies there is immense opportunity, not least of which is the chance to expand Stateside.
And this proves the point anyway; brands acquired by US firms are more likely to succeed across the pond exactly because they can rely on local knowledge and expertise.
Ultimately, as long as Britain remains an attractive market to work in, then its brands will remain attractive companies to invest in. Despite the challenges and uncertainties over the future thrown up by Brexit, there is also opportunity for those willing to take it, and take it they have. As is always true in business, the right people are the key to success, and hiring local talent is an essential tool for getting the most out of your acquisitions and deals.