BEN AND JERRY'S: THE UNILEVER SCOOP

BOSTON UNIVERSITYDepartment of Administrative Sciences Studies

Metropolitan College

MET AD 714: Mergers & Acquisitions

BEN AND JERRY'S: THE UNILEVER SCOOP

Mauro Di BuonoU41263257

11/12/2013

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BEN AND JERRY'S: THE UNILEVER SCOOP

Background

In 2001, Unilever bought Ben & Jerry's, the American Vermont-based ice cream

manufacturer. As the purchase was announced, on April 12, 2000, Ben & Jerry's pre-

deal stock pice of 21$ had substantially increased to 35$ and the company had $237

million in sales and $3.4 million in earnings.

Moreover, Unilever had increased its earlier tender offer of $36 to $43.60 per share or

£326 million total that have been paid by cash.

The companies: Unilever and Ben and Jerry's

Unilever is a British-Dutch multinational company in the consumer goods sector whose

products include foods, beverages, cleaning agents and personal care products. It is the

world's third-largest consumer goods company by revenues and the world's largest

manufacturer of ice cream operating in 88 countries, employing 255,000 worldwide,

and earning sales over 45$ billion in 1999 (data before deal).

Sell side, founded in 1978 by Ben Cohen and Jerry Greenfield, by the end of 1988, Ben

and Jerry's could count more than 80 ice-cream scoop shops in 18 states. In order to

continue with their success, sales reached more than $77 million in 1990, representing a

95% increase over their sales in 1984. It used to work with sustainable, Fair Trade

certified and organic suppliers; used environmentally friendly packaging; paid premium

prices to dairy farmers from Vermont who did not give their cows growth hormones;

and created business opportunities for depressed areas and disadvantaged people also

giving 7.5 percent of their pretax revenues to charity publicly traded.

Key facts: the reasons behind the acquisitions

Unilever’s aim was to focus on leading brands within its core business units and to

stree growth within developing countries. One of the reasons prompted Unilever to

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BEN AND JERRY'S: THE UNILEVER SCOOP

acquire Ben and Jerry's was its strong presence in the market among those customers

who appreciated the premium ice cream with unusual flavor names such as Karamel

Sutra or Chocolate Therapy, thus being an opportunity to scale up and enter several new

markets internationally.

Among the other reasons behind the acquisition Unilever's desire to enter the premium

ice-cream market, powerfully and quickly. Moreover, Unilever wanted to satisfy market

pressure to grow also responding to his first competitor Nestlè after it entered in a joint

venture with Haagen-Dazs in order to leverage each other's distribution channels, giving

them a strong advantage in the segment.

Another reason to acquire was the potential in Ben & Jerry’s global position and the

potential synergies of that position after acquisition together with the incredible B&J's

label brand equity.

One of the potential risk involved in the transaction was linked to the fact Unilever

would cushion the B&J’s progressive environmental and social activities.

Thus, in an attempt to not completely abandon Ben & Jerry’s core company values,

among the terms of the acquisition Ben & Jerry’s could operate independently from

Unilever's existing U.S. ice cream business, with an independent Board of Directors to

provide leadership for its social mission and brand integrity. Furthermore, Unilever

committed $1.1 million a year to charitable causes, making a $5 million one-time

contribution to the Ben & Jerry’s Foundation and promising to leave Ben & Jerry’s

continuing to devote 7.5 percent of its pretax profits to a charitable foundation, in order

to publicly show its support for Ben & Jerry’s values

Impact of acquisition and conclusions

Unilever saw great potential in the target also being positively impacted by the purchase

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BEN AND JERRY'S: THE UNILEVER SCOOP

whereas Ben-and-Jerry’s-values arose all over the company after the acquisition.

However, there are signs of lack of learning in Unilever's behaviour, for example,

failing to learn from Ben & Jerry’s involves Yves Couette, a long time Unilever

executive who joined Ben and Jerry’s for several years as the CEO (also known as Chief

Euphoria Officer).

While at Ben & Jerry’s, Yves took on much of the funky culture also adopting casuals

attire and accepting employee playfulness. But upon returning to manage Unilever’s

beverage division in late 2004, Couette took none of culture with him.

That's the reason why most people think Unilever lacked in learning the lessons that

from Ben & Jerry’s success.

By the way, as mentioned above, Unilever’s acquisition of Ben & Jerry’s has been

(financially) successful for both the company. In fact, at the time of the acquisition, Ben

& Jerry’s had $237 million in sales and earnings of $3.4 million increased its global

sales by 37 percent, tripling its operating margins and expanding into 13 new countries,

in the first three years after the deal.

From a social and environmental impact standpoint, Unilever is still trying to maintain

the Ben & Jerry’s culture of giving back to the community and saving natural resources.

Financially, the acquisition was a great move. Overall, this acquisition is a good model

for other companies and we can learn some tips from this deal: a) small divisions (such

as Ben & Jerry’s) can make a difference within large corporations (Unilever), b) profits

can also be sustained by doing good both in a social and in environmental way; c) large

conglomerates should respect the identity of their acquired firms; d) sustainable

companies should not be scared to be acquired since their acquirer can take financial

advantages to continue those kind of practices.

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