The recent announcement of a merger between American food industry companies Kraft Foods and H.J. Heinz, has received a lot of attention in the media. While perhaps best known for Kraft Macaroni and Cheese and Heinz ketchup respectively, both businesses own numerous other popular brands as well. The announcement of the merger is not a surprise since over the course of the past few years the plan has been being worked out.
In an earlier post we wrote about some of the different reasons why businesses might decide to merge. In that post we provided information about the following types of mergers:
- Vertical mergers
- Market extension mergers
- Conglomerate merges
- Product extension merger
- Horizontal merger
Among other things, depending on the companies the businesses may merge to quickly expand their geographical reach or save a significant amount of money. Sometimes a merger accomplishes a combination of these things. This may be the case with this particular merger.
The Heinz-Kraft merger is expected to do a couple of things. First, the fact that Heinz has a strong international presence is expected to help Kraft to expand its presence beyond the United States. In addition, the merger is expected to save both companies money. One estimate put the eventual savings at $1.7 billion a year.
Whether the merger will be approved remains to be seen. Over the course of the past few years however it is a safe bet that lawyers from both sides have done what they can to make the deal work on all levels.