Strategy is often a very emergent process, and this is especially true when M&A is involved.??This latest move by General Mills to strengthen its pet portfolio is a great example.
When I say emergent, I simply mean the strategy evolves, adjusts and adapts as new information becomes available.??All strategy should do this, but with M&A it is particularly true because not everything is for sale.??Not every company you like wants to sell to you at a price that makes sense.
A proactive M&A process starts with a scan for attractive market spaces and quickly proceeds to attractive acquisition candidates within those spaces.??It is a little like scoping a recruiting search for a key talent.??You spec the ideal candidate and go hunting.??But as with talent, there is seldom a perfect candidate available in the M&A world.??So, then you cycle back to who might be available and they might not be in the space you originally specified.??It is a highly iterative process full of disappointments and compromises until you find something that works.
The idea of pet food at General Mills goes back a long way and the company was in the category briefly in the 1950s and 60s.??But when I was doing M&A work at General Mills in the 2010s, pet was not in scope.??In fact, we explicitly asked a senior leader about openness to pet food and were told, “no, only people food”.?
Within a few years, the company had purchased Blue Buffalo at a crazy high multiple and that same leader was a huge supporter of the deal.??What changed?
Pet became attractive because Blue Buffalo was available, not because pet was strategically prioritized.??Pet was very explicitly de-prioritized when the process started.??If this sounds fickle, remember that a false consistency is the hobgoblin of small minds.??The company found a target that had high growth and high margins and the closer they looked the better aligned it was to the existing business and its capabilities.
Today, pet is a core strategy at General Mills.??They have gone from “only people food” to 12% (soon to be 15%) of high growth, high margin revenue focused on pets.??They have done it with five transactions in six years.??The strategy was not declared, it emerged through an iterative, practical and non-linear process whose answer no one imagined 10 years ago.??But once identified and validated it has been executed with conviction and consistency.
If you are a shareholder wondering if this is a good deal, I’m not here to analyze that for you.??I will note that 4.5x sales feels a bit high, but consistent with a general history of GIS paying up for stuff it wants.??Perhaps more importantly, if you were wondering when you might see the proceeds from the Yoplait divestiture coming your way, it looks like the answer to that question is: never.
CEO and Board Director at Primal Pet Group / Former President, Corp Devt at Central Garden and Pet / Former Executive Vice President, Specialty Division at The Clorox Company
1 周The mission and purpose you created 20+ years ago is the foundation of this brand and Company today, Matt. Thank you for getting this whole thing started! Many pets and their parents are much better for it, and there is more to come.