Nestle is selling its US chocolate business, which includes brands such as BabyRuth, Butterfinger, and Crunch to Ferrero for $2.8 billion. The deal is part of Nestle’s strategy to sell underperforming brands and refocus on healthier products and fast-growing markets. Nestle recently acquired vitamin maker Altrium Innovations for $2.3 billion and is rumored to be in the running for Merck’s consumer health business. On the other side of the transaction, the acquisition allows Ferrero, a family-owned Italian chocolatier, to expand in the US. Last year Ferrero also bought two US. companies: Ferrara Candy for an estimated $1.3 billion and Fannie May for $115 million.
Here are three key takeaways we can learn from this acquisition:
- Exit to grow – When it comes to corporate growth, leaders typically think about adding to a business, not subtracting. However, exiting a market is sometimes the best path for your company. Divesting allows you to concentrate on the areas that are most profitable for your business and stop wasting resources. Think of exiting as a way to recalibrate your business for future success.
- Follow consumer demand – As people demand healthier products, many food and beverage companies like Nestle are using acquisition to shift from junk food to healthy choices. Anticipating the needs and desires of future customers in your industry is critical to long-term success.
- Take frequent bites of the apple – Consider mimicking Ferrero’s strategy of executing a series of smaller, strategic acquisitions rather than one large transformational deal. Especially in the middle market, it’s often easier to integrate smaller deals and they are typically less risky. Each deal builds on the previous one and acts as a stepping stone to achieving your company’s growth goals.
Sometimes it can seem like the multi-billion-dollar transactions we see in the news are completely unrelated to what goes on in our own companies. However, on closer inspection, you will find that many of the underlying principles are the same. I challenge you to use these lessons to help you pursue growing your company through strategic acquisitions.
