Business Case Analysis

1742 words - 7 pages

ANNUAL GROWTH IN SALES

Mass merchandisers sellers, grocery stores, club stores, convenience stores represent the biggest opportunity to generate combined sales. WWAV and GIS participate in highly competitive markets and have devoted substantial resources into building their presence in the national and international segments. Both of these segments are highly important into branding the products and increasing their market cap. Combined efforts, manufacturers joint ventures, consumers, products and growth efforts would be potential key success factors into the merger. Based on both companies’ yearly growth sales we forecasted the annual growth sales as follows:
WWAV FORECASTED SYNERGIES ...view middle of the document...

Furthermore, there will also be redundancies at the executive level with overlap of Executive VP of Strategy & Corporate Development, Executive VP of HR, CFO, and segment President. If eliminated, these positions together would account for $18.1M annually. While we are cutting a large section of the executive team, we are interested in maintaining the CEO and Chairman of the Board, Gregg Engles to help maintain operations and culture at WWAV.
PLANNED SALE OF EXCESS ASSETS
WWAV currently has nine facilities across North America and Europe. Of the nine properties, six are manufacturing facilities and the remaining three are executive headquarters. Post-acquisition, we recommend the sale of the three executive office buildings due to the decrease in the sales and executive teams. WWAV will retain the six manufacturing facilities since they are already modified to manufacture products that GIS does not currently distribute. Through the sale of the three executive buildings, WWAV will acquire ~⅓ of total property, plant and equipment, or $208M.
COMPETITIVE REACTION TO MARKET
With major players at the top of the consumer packaged foods industry, the threat of new product entrants is relatively high across major competitors (Kraft Foods Group, Inc., Campbell Soup Co., Kellogg Co., ConAgra Foods, Inc. and PepsiCo Inc.). It is assumed that these top-earning competitors will continue to diversify their product offering to various organic products. Additionally, pressure from consumers and shareholders is driving some of the biggest players in the food and beverage industry to enhance and improve their corporate social responsibility initiatives as they become aware of their responsibilities to tackle some of the challenges facing the global food system. A recent “Behind the Brands” report (Oxfam, February 2014) assesses the social and environmental policies of the world’s ten largest food and beverage companies and calls on them to take the critical next steps to create a just food system. In a year’s time, General Mills’ ranking dropped from #8 in 2012 to #10 in 2013. It is expected that General Mills will further benefit from a lift in brand metrics by acquiring WWAV, a company that has steadfastly maintained a focus on environmental and social responsibilities. Over the past decade, an increasing number of companies have embraced CSR initiatives and disclose their activities to investors. Companies that pursue a strategy of “doing well by doing good” often improve their economic performance through enhanced brand reputation.
ECONOMIES OF SCALE
Consumer packaged goods companies continue to face challenges of geographic emphasis, expanding product portfolios and changing consumer expectations, all of which contribute to further complexity in their operating models. In the current business climate, expansion in emerging markets remains a major driving force. Combining GIS and WWAV will therefore provide internal economies of scale opportunities as...

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