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C A S E T E A C H I N G N O T E S
Wheres Irene and just exactly what is she up
to? The acquisition of Cadbury
by Kraft Foods, 2010
Eric Cassells
1. Introduction
This case relates the hard-fought acquisition battle by Kraft Foods to acquire the large
confectionery manufacturer Cadbury. Similar to many cross-border acquisitions the bid battle
2. Position of the case
The case study focuses primarily on issues of corporate-level strategy (Chapter 7 of Exploring
Strategy) particularly the use of acquisition as a tool for growth, the business rationale
underpinning bidding strategy, and the strategies deployed in a hostile takeover bid.
3. Learning objectives
A number of detailed learning outcomes are identified below:
Analyse the motives and drivers that underpin acquisitions
4. Teaching scheme
The case touches on a wide range of related concepts and practice in the acquisition/
diversification/internationalisation area. In addition, there is an unusually rich seam of material
on government policy issues (see Section 2.2), and this together with some of the in-bid
behaviours can lead to an interesting practical discussion of the role of personal and societal
There are a number of short YouTube and Vimeo videos that are useful to complement the
classroom sessions that you might wish to track down:
The University of Birmingham has limited case videos, including excerpts from a speech by
Cadbury ex-chairman
5. Questions for discussion
For the discussion and group analysis during the class session, the following questions can be
used:
1. Why did this deal take place? What was Krafts strategy behind the bid? Evaluate the
success of the acquisition.
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6. Case analysis
1. Why did this deal take place? What was Krafts strategy behind the bid? Evaluate the
success of the acquisition.
Chapter 10 of Exploring Strategy provides a number of frameworks and perspectives that can
help students make sense of this question.
Motives for M&A extension, consolidation, acquisition of capabilities, financial, managerial
motives.
Kraft saw the deal as complementary in the way it extended its brands (Cadbury had a much
The financial motivation would be expected to underpin such an acquisition, but the
intervention of Warren Buffett questioning this is very notable. The case does update some
of the analyst views of performance in the wake of the acquisition, but none of this is
ultimately conclusive. The question arises whether Kraft/Mondelez will suffer the winners
curse.
The financial motivation could be explored further possibly in post-class work by, for
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In considering Krafts strategy behind the bid, few analysts appear to have expected the
subsequent de-merger of the enlarged Kraft at the time of the Cadbury bid. This retrospective
knowledge gives a different perspective of what the thinking of senior management at Kraft
may have been.
2. Explain why Kraft succeeded in acquiring Cadbury.
The case provides a good opportunity to explore and discuss the strategies and tactics deployed
in a hostile takeover bid. This kind of exploration of an interactive competitive context can often
be one of the key weaknesses in teaching the practice of competitive strategy.
There are a number of points to consider:
The pitching of the initial Kraft bid, including the actions to trail the imminent bid and how
the bid compared to previous sector transactions.
3. Why was there so much acrimony during and after the bid?
This question opens up a large potential discussion area on the role of stakeholders on such
transactions, and the issue of competing values.
The reasons for the acrimony include:
Perceived threats to (national) heritage and concerns over the future of the Cadbury trust
funds.
At heart, there may be a fundamental disconnect between the values of many UK stakeholders
(voters, unions, workers, local and national politicians), and the values of the management of
both Kraft and Cadbury. Legally, the UK and US systems still enshrine the duty of management
to maximise the benefit of their shareholders, and Irene Rosenfelds explanation of non-
attendance at UK parliamentary committee could arguably reflect this (it could equally reflect a
The acrimony that might be expected in a large, hostile cross-border acquisition such as this,
was amplified, ritualised and institutionalised by the events at the post-acquisition parliamentary
committees, and in particular the non-appearance of Ms Rosenfeld at both of these events.
4. What changes should be made to better regulate hostile takeover bids?
This question should ideally provoke discussion from students, with only minimal tutor
intervention! Tutors should generally use simple open questions to ensure that students think
carefully about what they propose, for example, why do you say that hedge funds should be
restricted?, or okay, if hedge funds should be restricted in these transactions, how are you
going to implement that policy?
discussion, to be presented as a short formal debate in a future class. The motion for such a
debate might be:
This house believes that future UK governments should intervene through regulation to prevent
a re-occurrence of the loss of the independence of Cadbury PLC in 2010.
Notwithstanding the format you might choose to follow, possible points of view that could be
put forward include: