Billion Pound Mergers

What’s going on here?  

Kraft Heinz (the American food conglomerate best known for its baked beans) attempted a takeover of British consumer goods company Unilever. 

 

What does this mean? 

In February Kraft Heinz made a £115 billion takeover offer for Unilever. If the deal had been successfully completed, it would have been the second biggest merger deal of all time. However, the bid was rejected by Unilever, with a Unilever source stating that the two business were ‘fundamentally different’. The Unilever representative claims that they focus on growth, while Kraft Heinz focus on reducing costs at the expense of quality. Kraft Heinz have now withdrawn their proposal of a merger, as it was clear that a friendly deal was never going to happen.

 

Why should I care?

Although the deal failed, this story is a prime example of foreign companies looking to take advantage of the weaker pound caused by the uncertainty surrounding Brexit negotiations. A weaker pound results in British companies being much cheaper targets for foreign investors looking to merge. This is because the exchange rates between the pound and foreign currency (in this case the US dollar) is not currently in favour of the pound, resulting in better value for foreign investors.

This deal may perhaps signal the start of a potential increase in the number of mergers that will take shape involving British companies. As a consequence of this, the Mergers& Acquisitions departments of commercial law firms will be busier than ever. When advising on such mergers, law firms will need to advise both UK firms and foreign investors looking to merge. They will be required to prevent domestic companies from being taken advantage of, while also working to get the best deal possible for foreign companies. 

This contemporary issue is a great example of how the current economic climate will effect law firms and businesses alike.

 

Article written by Matthew L.

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