Below is an excerpt from How to Approach M&A Integration to Create a Sustainable Advantage. Download the full eBook at the link below.
Consumer products companies are in the midst of dramatic transformations. They are striving to innovate at the pace of changing consumer preferences, understand which behaviors will sustain post-pandemic, and create value for consumers beyond the products they sell.
Product innovation has increasingly been a challenge for incumbent CPG leaders. Research shows that R&D spending in large companies and the number of new products that result have been declining for decades. To fill the gap, CPG companies have increasingly relied on acquisitions to add new products to their portfolio and gain access to growing markets.
As a result, post-merger integration has become a critical means to create value. No longer is integration simply about creating synergies, but instead an opportunity to deliver for the consumer, ignite the innovation engine, and transform the acquiring company. Winning companies have three critical enablers in place to achieve successful M&A integration– the right mindset, the right team, and the right playbook.
Product innovation (R&D) spending for most CPG companies lags significantly behind other industries. Analysis shows that large CPG companies today allocate between 1 and 3 percent of their annual revenue to R&D spending. This small portion is also split among several competing interests. The lion’s share is often allocated to renovation of existing product lines or line extensions, as opposed to greenfield product innovation.
There are many reasons for this continuing trend. Reduced R&D productivity resulting in fewer novel products has shifted focus away from internal innovation. In a world where the corporate focus is on shareholder return, the best bang for your buck has not been found in R&D. Yet the industry relies on new products and new ideas to surprise and delight their consumers. Consumer loyalty is harder than ever to gain and maintain. In this context, companies have turned to M&A to achieve their goals.
Download the full How to Approach M&A Intregration to Create a Sustainable Advantage to learn more about the innovation crisis in the industry, how businesses are leveraging M&A, developing a guiding M&A mindset, pulling together the right M&A team, creating the optimal M&A playobook, and more.
Download the full M&A integration eBook here.