Staying healthy

Are you driving the most value from your niche acquisition?

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In a bid to capture the next generation of growth, large consumer products companies are acquiring niche brands (see infographic here). With the overall M&A market set to improve steadily, food majors are well placed to pick up the pace of niche acquisitions.

Despite a relatively stagnant food market, the health and wellness segment has enjoyed robust growth in recent years. Sales in the sector are set to top US$100b in 2015, according to our Consumer Products and Retail Global Capital Confidence Barometer.

The challenge, though, lies in driving value from these deals. Without a balanced operating model, niche acquisitions can go wrong. So far, the most prevalent strategy has been to keep the acquired brands as stand-alone entities, with little or no integration with the parent. But major food companies are re-evaluating this strategy.

Three steps to integrating niche brands

EY - Three steps to integrating niche brands The key to making niche acquisitions work is to integrate them effectively without destroying the essence of the acquired brand. There are three basic steps to getting a niche brand acquisition right:

  1. Understand and articulate the deal rationale
  2. Protect and preserve the target’s key success drivers
  3. Integrate everything else
 

What’s the best target operating model?

There is a wide spectrum of possible operating models for niche brand acquisitions, but no matter which one you choose, your objective should be to balance brand equity with commercial growth. Alternatives range from a decentralized stand-alone model to a fully integrated functional model.

Keeping it simple: six critical success factors

The key to making niche acquisitions work is to find the right operating model to balance brand equity with commercial growth. The guiding principles are simple: keep the true drivers of brand value stand-alone, and integrate everything else.

 

EY - Establish clear ownership and accountability for each initiative or project

1. Establish clear ownership and accountability for each initiative or project. This also means aligning executive goals and incentives with program objectives and benefits.

 

2. Focus on benefits. Place a relentless focus on business value and link this value to financial statement line items. Define processes to sustain benefits and conduct follow-on audits. Prioritize and implement initiatives to deliver value early, create momentum, and partially or entirely “self-fund” the program.

EY - Focus on benefits
 
EY - Identify unique capabilities

3. Identify unique capabilities. Concentrate on building a priority set of business capabilities that will help differentiate the brand in the market.

 

4. Set up a clear governance structure. Create a multi-tiered governance structure and decision-making rights, from boardroom to break room and make sure to focus on milestones and outcomes.

EY - Set up a clear governance structure
 
EY - Develop a change management plan

5. Develop a change management plan. This will involve rigorous executive alignment up front and throughout. Define program-specific HR/talent processes, policies and infrastructure right from the beginning.

 

6. Staff the acquisition appropriately. The right people and teams will make all the difference. Pick the “best of the best” in the context of clear career and leadership development paths.

EY - Staff the acquisition appropriately

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