Although the merging sounded strategically compelling, the two companies could not manage to merger due to cultural variation. In November 2000, shortly after Triarc sold Snapple to Cadbury Schweppes, I posed those questions to Triarcs top executives: chairman and majority owner Nelson Peltz, CEO Mike Weinstein, and marketing director Ken Gilbert. It's the breakfast food of the health-conscious today, and that's in large part due to some official FDA claims Quaker Oats made possible for everyone. Investopedia requires writers to use primary sources to support their work. These offerings provided transportation at shorter distances and resulted in less-predictable, higher-risk cash flow for the Northeast-based railroads. Believe it or not, there's nothing bland about Quaker Oats or where they come from. Researchers wanted to know what kind of effects radioactivity had on the human body, as more people were being exposed to it than ever before. Question: POML5) A principal reason . But, are they? The dollar value of mergers and acquisitions soared to $659 billion in 1996, nearly double the number in 1994. Another element of Quakers Snapple strategy came straight out of the Gatorade playbook. After 27 months, Quaker Oats sold Snapple to Triarc for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. "AOL Time Warner to Lose Turner, Posts $99 Billion Loss.". His byline has appeared on Fox News, Forbes, and TheStreet.com. The term mergers and acquisitions (M&A) refers to the consolidation of companies or their major assets through financial transactions between companies. How many times have you started your day with a piping hot bowl of Quaker oatmeal? The Quaker Oats Company, founded in 1891<br><br>William D. Smithburg appointment as CEO in 1979<br> 4. Log in Join. They gave Triarc a chance, I would submit, because Triarcs presentation convinced the distributors that Snapple once again had an owner that understood the spirit of the brand. At the time of the initial acquisi- Give some thought as well to its soul. Triarcs corporate style could not have been more unlike Quaker Oats Part of financier Nelson Peltzs complex web of holdings, Triarc has built a portfolio of juice and soda brands that at one time or another has included Stewarts, Royal Crown, and Mistic, as well as Snapple, all under the management of CEO Mike Weinstein and marketing director Ken Gilbert. With the decline of cash from operations and with high capital-expenditure requirements, the company undertook cost-cutting measures and laid off employees. It's hard to know if Quaker Oats knew what a revolutionary idea they had when they printed a recipe right on the box. Other breakfast foods were also found to contain the weed-killer chemical, like Cheerios and Lucky Charms. EN English Deutsch Franais Espaol Portugus Italiano Romn Nederlands Latina Dansk Svenska Norsk Magyar Bahasa Indonesia Trke Suomi Latvian Lithuanian esk Unknown The company changed its name to Quaker Foods and Beverages after being acquired by PepsiCo, Inc., in 2001. ''But even Pepsi messed up its restaurant lines. By gaining access to each other's customer bases, both companies hoped to grow by cross-selling their product and service offerings. It's easy to do! That got people noticing his oats but making them? Quaker & Snapple. Reading more about the merger between Quaker Oats and Snapple and how it failed to succeed, it became clear that Quaker Oats conducted an inadequate due diligence process and that the main reason for this was due to managerial hubris within the company. In their Complaint, Plaintiffs contended that when negotiations between Quaker and Snapple escalated in and around August 1994, Quaker and Smithburg must have known that its previously stated debt-to-capitalization ratio (also known as "leverage ratio") guideline, the upper-60 percent range, was no longer a realistic possibility. At the time, Snapple was still run by the three founders of the company. Many soft-drink brands flourished in the 1980s serving New York's Yuppies, but only Snapple made the big time. However, time and again, executives face major stumbling blocks after the deal is consummated. Gene Wilder's Willy Wonka & the Chocolate Factory is one of those iconic movies of any childhood even if it did give you nightmares. - Merger of AOL and Time Warner, 2001. Quaker Oats & Snapple (1998) Disaster: US $1.4 billion The Quaker Oats has acquired in 2 different US states. Triarc said it expects to complete the purchase in the second quarter of this year, pending a federal antitrust review. ''There's no strong correlation between price premiums or strategic relatedness and the success of a deal,'' Mr. Smith said. He decided on packaging his oats in the round, colorful containers we still see today. In fact, 31 of the 45 samples of oats tested were deemed to be below their safety criteria, and when they went back and tested more samples of both Quaker Oats and Cheerios, they found that all but two (of 28) samples were deemed "harmful.". Brand meanings and associations arise as a kind of found consensus between what the marketer wants and what the consumer has use for. It identifies the three major reasons for the failure as distribution problems, stagnant industries, and rival wars. I knew Mike and Ken would make mistakes, Peltz says. Some like the World Health Organization's International Program on Chemical Safety say it's not a concern at all. customer feedback. The labels on its bottles were cluttered and amateurish, and its ads seemed, if possible, even more homemade. There's a long-standing belief that he's the founder of Pennsylvania, William Penn. Until Quaker Oats possessed Snapple, it caused them a loss of $1.6 million on a daily basis. Despite protracted negotiations with individual distributors and distributor councils, no channel rationalization was achieved. 2 In 1998 The Quaker Oats Company owned four other brands that led their respective categories: Gatorade thirst . So when we come up with a new idea, we roll with it. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. Instead, it flowed through the so-called cold channel: small distributors serving hundreds of thousands of lunch counters and delis, which sold single-serving refrigerated beverages consumed on the premises. Done to avoid controversy, the terminations inflamed it instead. It used its leverage with supermarkets to win premium display space and squeezed costs out of the supply chain. I would explain it differently: First, as every brand manager would surely agree, good brand management is explained more by process than by strategy. In such a commoditized business, the company did not deliver on this critical success factor and lost market share. Its number one priority: repair relations with disgruntled distributors. It took Novell Inc. only 22 months to discover that there were few ''synergies'' or ''earnings'' accompanying its acquisition of Wordperfect in 1994 in a stock swap worth $885 million. The railroads, which were bitter industry rivals, both traced their roots back to the early- to mid-nineteenth century. That changed after Quaker Oats reached out to the FDA and requested permission to advertise the fact that including oats in a balanced, low-fat diet would help reduce the risk of heart disease. DEAL VALUATION Quaker paid $1.7 billion to acquire Snapple in December 2004. Variations in temperament go a long way toward explaining why brands that flourish in the care of one custodian wither in another. The Quaker Oats' largest acquisition to date was in 1994, when it acquired Snapple Beverage for $1.7B. "Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc.", U.S. Securities and Exchange Commission. Quaker Oats and their family of products have been a part of our everyday life for decades. Along with ditching the much-despised 32- and 64-ounce bottles, the marketing team sent the distributors a clear message that they were part of the family and not an inefficiency that ought to be eliminated. smaller yet more publicized deal - the acquisition of Snapple - that will go down as Smithburg's, and Quaker's, costliest mistake. '', See the article in its original context from. But a marketing professional would probably explain the improved fit in terms of distribution economies or manufacturing synergies. ", University of Pennsylvania-Knowledge@Wharton. The price tag to acquire Snapple was $1.7 billion, considered by many to be an astronomical sum. While their efforts should be recognized, it does not do justice to the acquiring group's investors if the deal ultimately does not make sense and/or management pays an excessive acquisition price beyond the expected benefits of the transaction. At the same time, Quaker management failed to understand the differences between promoting and distributing Snapple versus Gatorade. Management pushed for a merger in a somewhat desperate attempt to adjust to disadvantageous trends in the industry. So, there you have it. Further, a macroeconomic downturn led customers to expect more from their dollars. Oatmeal has come a long way as far as reputation is concerned. Technological dynamics of the wireless and Internet connections required smooth integration between the two businesses and excellent execution amid fast change. e) the liabilities of a company. TimesMachine is an exclusive benefit for home delivery and digital subscribers. Cadbury paid $1.45 billion for Snapple and a number of other Triarc brands, including Royal Crown, Mistic, and Stewarts. There was no such mismatch between Gatorade and Quaker. Nextel had a strong following from businesses, infrastructure employees, and the transportation and logistics markets, primarily due to the press-and-talk features of its phones. According to the US Army Corps of Engineers, they manufactured bombs, artillery, and ammunition ultimately sent to the Pacific theater. According to Stuart, his views came from the idea "[] that the US didn't accomplish much in committing troops to the First World War," and they were all about keeping America out of the second. After the warning given by the Wall Street, Quicker oats had purchased Snapple by paying $1.7 billion. Small as the individual distributors were, they aggregated into a mighty marketing force. Quaker is serving up wholesome goodness in delicious ways from Old Fashioned Oats, Instant Oats, Grits, Granola Bars, etc. In just 27 months, Quaker Oats sold Snapple to a holding company for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. "Time Warner Merger Terms Approved. Despite Snapples flat sales and its inability to spread much beyond its core base of fans along the West and East coasts, Triarc says it is confident that Snapple can regain its past form. "Pennsylvania Railroad and New York Central Railroad Records, 1853-1965. We had no game plan to assure Snapples recovery, Peltz says. "Form 10-Q for the Quarterly Period Ended September 30, 2005. Even now, mere mention of Quaker Oats acquisition of Snapple causes veteran deal makers to shudder. We didnt have a lot else to tell them. In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. The confidence was easily understood: Quaker had an impressive record in beverage marketing, having developed Gatorade into a powerhouse national brand by skillfully executing a plan drawn straight from the marketing textbooks. Most of those have a ton of added sugar, and even ones that sound like they should be healthy can come with some not-so-great ingredients. Nextel employees often had to seek approval from Sprint's higher-ups in implementing corrective actions, and the lack of trust and rapport meant many such measures were not approved or executed properly. It then compounded the misstep by dropping Wendy the Snapple Lady from the ads and even eliminating her job. Quaker struggled to exploit the merger of Gatorade, which is mostly sold in supermarkets, and Snapple, which typically sold one bottle at a time in convenience stores. Ken said, Wouldnt it be great if we took Wendys picture and wrapped it on the bottle? Weinstein thought it was a terrible idea, but he told Gilbert to try it anywayand to rehire Wendy Kaufman while he was at it. What did Triarc do with such apparently effortless grace that Quaker, with all its resources, could not? Within weeks, it was clear from their field reports that young consumers, drawn by the Snapple seal of approval, had tried Elements, liked it, and wanted more. Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc. Form 10-K for the Fiscal Year Ended December 31, 2008, Diversification of product and service offerings. Cheerful, zaftig, and blessed with a Noo Yawk accent strong enough to peel paint, Wendy blossomed into a minor celebrity known to her fans as the Snapple Lady. Now that we've learned about multiple ways of diversification, let's return to our example and explore why the Snapple acquisition may have failed. GE bought Kidder for $600 million in 1986, but had invested an additional $800 million in the firm between the purchase and the sale. Of course, the resultant declines in service only exacerbated the loss of customers. Around this time, the race to capture revenue from Internet search-based advertising was heating up. Just think of where some of these companies could have better invested that money. The two combined to become the third-largest telecommunications provider, behind AT&T (T) and Verizon (VZ). Can AT&T Avoid the Merger Mistakes of AOL-Time Warner? SBC was founded by Leonard March, Hyman Golden and Arnold Greenburg in . Less than one year after Quaker Oats acquired Snapple for $2 billion, Snapple's sales were declining, calling into question the value of the $1.3 billion in goodwill Quaker Oats had recognized at the acquisition.

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