FINANCIAL INVESTMENT IN
THE MODERN BUSINESS WORLD: MARS ACQUIRING KELLANOVA
Acquisition one of the smartest strategies to grow in the
fast-changing business world.
A
well-known recent incident that was published in Bloomberg was the acquisition
of Kellanova by Mars, which was valued a staggering $36 billion. This was known
to be one of the largest food industry acquisitions in recent years. Mars being
a well-known global confectionery brand and Kellanova a well-known owner for
snacks like pringles and pop tart.
Financial Investment isn’t only about buying share or assets of a
business, but it is also about the strategic decision taken in order to shape
the future of the business. A common business investment used today is
acquisition where businesses invest a large amount of capital to acquire other
businesses. This shows how this acquisition is a great example who uses
financial investment to secure long-term goals.
What
is a Financial Investment?
Financial
Investment is known as the allocation of a businesses money into projects,
assets and acquiring businesses with the aim to generate future returns.
Through Mars acquiring Kellanova, Mars is basically investing a large sum of
its money into acquiring a well established organisation in order to generate
long-term returns through the increased market share, strong brand presence and
improved profitability. I believe that the management of Mars would have asses
both the risk and return before the acquiring, Mars is taking a significant
financial and operational risk but it’s also expecting to get some value out of
the strong portfolio of Kellanova.
One of the main reason businesses like
Mars acquired Kellanova is growth, rather than building new product line from
scratch, Mars could simply gain access to the global snack industry of
Kellonova’s established brands immediately. This is one of the best efficient
ways for fast growth in a competitive market. Another reason would be synergy,
both firms are offered a chance to tap into each other’s distribution networks
and their marketing strengths and operational efficiencies.
B
ased
on my view I could see a synergy here, and this is a main reason to why large
organisations are attracted to acquire and combine businesses which would help
them to create more value more than two individual operating businesses. I also
understood that by acquiring Kellanova it helps Mars to spread its risk across
different product ranges and consumer markets. Even though Mars expects
long-term benefits, there is always uncertainty about whether the expected
value would be achieved.
The big upside about Mars taking over Kellanova is that
through the investment Mars has access to ready-made product such as: Pringles
and Pop tart which is available globally. It helps the business to achieve
economies of scale. It would help both businesses to bring down costs on
production, logistics and marketing expenses, which would make the business
more efficient and more profitable in the future. At the same time the firms
would be able to have a great market power, the Mars-Kallonova deal would make
them a powerful organisation in the global snack industry which would allow
them to bargain with their suppliers and retailers. Moving to the risks Mars
would also have to takeover, the first would be the financial risk, the
acquisition value of $36 billion is a significant amount of money. Even though
both Mars and Kallanova are doing well on their own; by acquiring the two multi-national
companies can have its challengers such as culture differences, different
systems and operations. When the integration is not realised it would reduce
the benefits of investing to the organisation.
However, I believe that the acquisition of Kellanova by Mars
shows a strong example on how financial investment could be used in order to
create a long-term business growth and competitive advantage. Based on my
understanding, the acquisition benefits Mars since it is able to expand its
presence in the global snack industry and strengthen its product portfolio.
Kellanova on the other hand would also benefit from having a greater financial
backing and wider global distribution. I have also learned that the financial
investment decisions are not only based on generating profits, but also it is
about balancing the risks, long term sustainability and strategy. A successful
acquisition requires a careful planning and strong management in order to
create value for both the business that’s involved.
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