More mergers and acquisitions required
The Strategic Necessity of Mergers and Acquisitions
At my first real job, the company I worked with acquired another in the same line of business. I recall the briefing at our management meeting, and soon after, new packaging material was on the floor. The brand name was retained, and the products were retailed at a lower price. The product was the same; only the packaging was different. I remember persuading my sister to switch to the less expensive brand. I had already shifted, convinced that the only difference was in the packaging print. That was my first experience with an acquisition. The company continued with many other acquisitions, and today it is an economic giant.
Following this employment experience, I enrolled in business school and began studying strategy. Mergers and acquisitions (M&A) are something that every strategy student is familiar with. M&A are frequently used as a strategic move worldwide. Through M&A, many smart businesses have increased their market share and expanded into new markets. I recall reading numerous case studies of companies that had successfully implemented this strategy to stay competitive and those that had struggled in execution. Mergers and acquisitions have helped many global businesses, such as Unilever, grow. Unilever, I believe, makes an acquisition nearly every year. The USA’s top four banks, namely Citigroup, Wells Fargo, JPMorgan Chase, and Bank of America, were 35 separate companies in 1990. The M&A strategy has worked for them!
The Case of iHeartMedia
The history of Clear Channel Broadcasting, Inc. (now iHeartMedia and Entertainment, Inc.) acquisitions is fascinating. The founders went on a buying frenzy for radio and television stations across the United States. iHeartMedia now owns over 800 radio stations in the country. This would not have been conceivable without numerous acquisitions. Some acquisitions are unique in allowing companies to operate independently to avoid a cultural clash. It’s not always easy to get the best of both worlds in cultural matters. Amazon and Whole Foods have struggled to align internally. Unilever’s acquisition of Ben & Jerry’s was unique. Ben & Jerry’s unique culture meant it would best operate as an independent enterprise. It is often said that Ben & Jerry’s was bought out without selling out. It took more than 20 years for Ben & Jerry’s to become a wholly-owned subsidiary of Unilever. Cultural integration is sometimes one of the most difficult barriers to overcome in properly merging.
M&A in the Kenyan Context
Certain sectors in Kenya have witnessed M&A. In financial services, Consolidated Bank was formed in late 1980 when nine financial institutions merged. Less than three years ago, two major banks merged to form NCBA Bank. Brookside is a superb example of successful acquisitions in the manufacturing sector. I am curious – how many Kenyan businesses are considering M&A as a means of expansion? As the regulating authority directed by the Competition Act, the Competition Authority of Kenya (CAK) is part of the process. M&A are reported to CAK, which approves or rejects the transactions. This is only required for M&A whose combined turnover or assets are higher than Kshs. 500 million. That means that the thousands of Kenyan businesses that fall below this threshold have the freedom to merge and acquire. Are you in business? What stops you from looking for a business to merge with or acquire?
Conclusion
Mergers and Acquisitions can be a powerful strategic tool for growth and market expansion. They offer businesses the opportunity to gain market share, enter new markets, and achieve economies of scale. However, successful M&A requires careful planning, execution, and often, delicate cultural integration. As business leaders, it's crucial to consider M&A as a viable strategy for long-term growth and to navigate the complexities that come with it.
Management Consultant and Trainer
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