KRAFT AND CADBURY MERGER ANALYSIS PDF

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Covid Update: We've taken precautionary measures to enable all staff to work away from the office. These changes have already rolled out with no interruptions, and will allow us to continue offering the same great service at your busiest time in the year. Disclaimer: This work has been submitted by a student.

This is not an example of the work produced by our Dissertation Writing Service. You can view samples of our professional work here. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays. This paper aims to critically evaluate the success of Kraft acquisition of UK based company Cadburys. This will be followed by an Analysis section, in which I analysed all actual findings regarding the literature.

The different ways of financing an acquisition, and the advantages and disadvantages of each method. Reis et al.

Hitt et al. Mayrhofer proclaimed that in a merger, firms combine their assets with the intention of creating a renovated company, whereas in an acquisition, one firm takes control of most of the capital of another corporation and unite the two companies. Barmeyer and Mayrhofer, , pp. Nevertheless, many academics argue that acquisitions are one of the most valued means to business growth Grundy, I will be focusing on the most common success factors set out in the literature in this paper, when evaluating the success of the Kraft-Cadbury acquisition.

Additionally, Cadbury was not only not for sale, but it vigorously withstood the Kraft takeover Moeller, Regardless of this in Kraft Foods launched a hostile bid for Cadbury Wood, Irene B. De La Merced, On the other hand, the furniture company might buy a distribution company, to safeguard that its products are transported successfully to customers please note: this is known as a downward acquisition. Furthermore, the motive for this impression might be to support i. So, the return on investment after the acquisition might be expected to grow in the first case, but not necessarily in the second case although the overall portfolio risk may decrease if the portfolio is more balanced.

This indicates purchasing a company which is of the same type, e. Therefore, there are three types of acquisitions which consist of different elements and which are measured in different ways, however success in each type of acquisition can be therefore be very different.

This argument also assist to eradicate inept and mislead management and improve underrated shares such as robust companies of partial sturdy form of stock market inadequacy. Farma et al. Cording implies this is because the announcement effect event study measurement method is arguably useful at times when studying the proceed of variables that are publicly known at the time period of the acquisition declaration such as strategic likeness, acquirer acquisition reputation, or pre-acquisition profitability.

Furthermore, this method is considered beneficial since when returns are evaluated over a moderately short period, aspects other than the acquisition that could potentially have an impact on the stock value can be eliminated Cording, However, this measurement method is criticised on the grounds the assumption of rationality is questioned, this is because the events under study using this measurement method is majority of the time unexpected, which is therefore considered disadvantageous as the assumptions made may not be reliable which could potentially cause implications Cording, Therefore because of the various assumptions required in the use of this method, and the weaknesses which result from these assumptions as set out above , this method will not be applied in this study.

Long term stock performance measurement method is another measurement method that is considered beneficial since it extends the time frame to one or more years to help capture more efficient information that is of use to investors and which also consists of allowing accurate estimates of future cash flows whilst reducing precariousness Lubatkin, Furthermore, this method is also criticised since it has methodogical problems.

For example, test conducted using this method are essentially joint tests of stock market effectiveness and a model of market equilibrium as the stableness of the expected stock price is the basis of the measure.

Additionally, concerns regarding this measurement method revolve around the idea that the fundamental expectations relating to costs are desecrated as per the event window being lengthened Andrade et la, This therefore means that the results of long term expected returns and measures of long term abnormal returns are imprecise.

Subsequently, because of the weakness of this approach it will not be used in this study. Cording states accounting based measurement method is based on accounting data which also captures a long-term perspective of acquisition performance.

This method is considered beneficial as it depicts the showing of actual returns a company may accumulate. Nevertheless, the method is arguably useful and generally better than i. Hence, because the strengths of this method outweigh the strengths of the first two quantitative methods discussed, it will be used in this study using certain accounting ratios.

These will be set out and discussed below. Firstly, profitability ratio is a useful measure that helps to measure the financial performance of an acquisition. The Balance, Return on capital employed ROCE is used to help figure out how efficiently financial capitals are organised by obtaining corporations. ROCE also helps to specifies how efficiently the long-term amounts of the holders and lenders remain being used and emphases straight on operating efficiency ACCA, Secondly, financial leverage ratios help to measure effectively the value of equity that a business may have by evaluating the businesses debt.

Thirdly, liquidity ratios are used to examine the capability of a business to pay off its existing current liabilities and its long-term accountabilities. In summary, these ratios display the cash levels of a company and the aptitude to navigate other assets into cash to help rectify and pay off the long-term liabilities and other current owing Rehman, Cording , argues managerial self-assessment is well-defined as the managerial views regarding the level of value creation.

This method is considered beneficial as it helps to capture both public and private evidence and tries to evade problems such as aggregation inclination, nevertheless other prevalent predispositions are current. Furthermore, this method is considered useful as it aids in helping researcher in choosing an appropriate study that bring into the forefront the proposed judgement with the option of measures that results in more financial information accuracy. For example, this method can seize the effects of detailed, privately recognised variables that could take a substantial amount of time to produce results, such as new capacity development Cording, Therefore, for these reasons this method will be used in this study.

Hence, in most cases, it is applied when experts in the area under study can be well-defined and they can contribute. Nevertheless, this method is criticised since selecting the expert is the most problematic aspect of i.

On the other hand, the method is beneficial as experts are seen as providing valuable source for the elaborate history of a certain technology and its evolutionary steps that have occurred in the past. Nevertheless, the process is also criticised for having a difficulty to identify experts and since bias arise from the knowledge of expert. It is felt, however, that the strengths of this approach outweigh the weaknesses, and for this reason this method will also be used in this study Cording, Trautwein supported this conception by arguing strategies and organisation aid to decide whether a merger or acquisition will be successful or not.

Collan and Kinnunen similarly, argued a company must have an efficient strategic plan for the merger or acquisition to be a success. Exploration also depict, that qualified acquirers can produce routines and habit for acquisition implementation which is considered advantageous to the acquiring company Al-Laham et al.

Brock, DiGeorgio however, criticised this view by arguing speed integration is recognised as the reason why some acquisition fail. Despite this, its argued business organisations stress the advantage of speed integration to companies pursuing merger and acquisition success Schlaepfer et al.

This means negotiators who communicate in positive mood tend to be more cooperative and in the case the acquiring company have certain personality characteristics such as cultural sensitivity, empathy and flexibility in the trading process, which naturally lead to a win-win agreement between the two joining organisations.

When you take out a bank loan, you have complete control over what you do with the money. Unlike other forms of loans and financing, the bank does not assume any sort of ownership or influence in the way you run your business.

Nevertheless, paying back the loan also is your responsibility, and failure to do so can result in the bank foreclosing on your business. This is different from equity financing, for example, through which investors take part ownership of your business.

Bank loans offer you access to a wide array of terms, fees, application requirements and interest rates. These variables often differ from bank to bank, and usually can be negotiated and adjusted; you can shop around for the loan terms that best suit you and work with the bank to make the deal as sweet as possible.

An issue to keep in mind is that interest rates can rise, making a loan unpalatable or very difficult to pay back. Banks normally require a lengthy and thorough application process before they will approve you or your business for a loan. Especially in the case of small businesses, which often fail, banks want many details about your business plan before they are confident about loaning you money. This can be a hassle and an obstacle to funding.

However, a strong application with a solid business plan and good referrals can make you look very appealing to the bank and win you favorable terms for the repayment of the loan. Credit history is a crucial determining factor for getting a bank loan. Poor credit can pose an obstacle against favorable loan terms or even for securing a loan at all. This is not an issue for other types of funding, such as stock offerings.

However, good credit can result in a much higher chance of approval for a loan and favorable terms of repayment. Credit ratings can be repaired and bolstered before approaching a bank for a loan. Even for people with substandard credit, bank loans can be beneficial. Although the terms might be harsh at first, successful repayment of bank loans can be used to build up your credit, making you a more appealing candidate for loans in the future.

Schoenberg, R. Cabanda, however criticised this view by stating three years after an acquisition is not long enough to measure whether an acquisition was a success.

Cadbury ROA in was 3. This is because in krafts ROA was 8. Furthermore, Cadbury ROS was 5. This increased in to In Cadbury NPR was 5. Despite this, after the acquisition, in the company NPR was 5. CATR was 3. Similarly, leverage ratios were used in this study to help evaluate whether the acquisition was a success or not. In Cadbury debt to asset ratio was However, although the company debt levels appeared to be decreasing, the following year in it significantly increased to The current ratio in was However, after Kraft acquired Cadbury in it was 1.

However, after Kraft acquired Cadburys this decreased to Furthermore, the efficiency ratio of CATR was also used in this study to help confirm these findings. For instance, in CATR was 3.

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Case study: Kraft takeover of Cadbury

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Covid Update: We've taken precautionary measures to enable all staff to work away from the office. These changes have already rolled out with no interruptions, and will allow us to continue offering the same great service at your busiest time in the year. Disclaimer: This work has been submitted by a student. This is not an example of the work produced by our Dissertation Writing Service. You can view samples of our professional work here. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays. This paper aims to critically evaluate the success of Kraft acquisition of UK based company Cadburys.

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