Blog

Believe it or not, this expression relates originally to biology and was first coined some two centuries ago, by Charles Darwin’s grandfather. More recently it got a different meaning and now also relates to growth (or the lack thereof) of businesses.
Which brings us into the M&A arena; that in itself looks like an odd description because the M hardly or ever seems to happen. Mergers do not fit our definition of and desire for power; that we must share if we think M.
And yet the M may become strategically more important in the future. Because the incessant quest for power through acquisitions may become a zero sum game (the gain of one equals the loss of the other; the net growth is zero). Of course we must also not forget that the increase of power seldomly leads to taking risk; the vested interests must be protected and grow the more the power grows. New initiatives that our industry increasingly will need will be harder to come by.

For probably the last 10-12 years our industry has largely depended upon newcomers to rock some boats. People with fresh, non-axiomatic ideas and concepts that opened new categories (and some eyes as well). And the established forces in the industry sat back and waited for the dust to settle to absorb these newlings at ever increasing valuations, sometimes of mind-boggling proportions.
Can this continue in a saturated market in which any growth beyond inflation must come from stealing share from others? I think there is an end to that game because the enormous amounts involved in pet food acquisitions can well have reached their ceilings; if a decent payback is still the objective of the investors. A payback that is increasingly difficult to achieve in a market in which margins are under pressure. A payback that then becomes less attractive for the money industry.

The successful newlings have so far nothing to complain about. They are sought after by the established pet food powers; and will find a more than decent selling-price for their activity if they wish to sell. But that is not where the biggest mass of investments in our industry lodges. These newlings are not the ones who continue to invest in capacity-expansion in product-categories that have reached their maximum potential.
They do not yet suffer from dealing with a consolidating retail-industry or the need to wring the last penny out of the assets to remain profitable and not become vulnerable.

Therefore I think we need to give a twist to “eat or be eaten”; by eating together, by joining forces to achieve synergies and together reach a size and strength that can withstand the next economic or other storm which is bound to come. In other words by merging strengths and thus undo weaknesses without costly investments in acquiring companies. Nobody eats, nobody is eaten.
So, let’s bring the M in M&A back to where it belongs: in the centre of attention as a serious strategic option for ongoing and successful businesses.