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Q.2 Do the synergy plans look more or less likely that you will support the bid?

Answer-2
The bid of US $4.2 Billion made by Cadbury for Adams looks apt keeping in mind the
benefits it is getting from Adams acquisition. Some of the Synergies and benefits Cadbury is
having from these acquisitions are as:-
1. The acquisition will transform the scale of Cadbury confectionery business and will
position the company strongly in growth sectors of the confectionery market and
provides the group with significant value creation opportunities. The acquisition is
consistent with Cadbury Schweppes strategy of building robust and sustainable
businesses and growing the business both organically and through value creating
acquisitions.
2. The acquisition will make it a leading player in the confectionary market with around
near 10% volume share of the total market. The combined product portfolios of
Cadbury Schweppes and Adams will provide the total category solution to retailers,
help the firm to raise the prices and will help the global confectionery business to
meet the full range of its customers' confectionery needs - chocolate, sugar and gum.
3. Both the firms have dominance in different parts of world which is kind of
complimentary fit to each other.
4. Cadbury Schweppes expected $275 million in revenue synergies in the U.S from the
launch of two brands which would leverage Adams route-to-market (RTM) and
Cadbury confectionary expertise.
5. Adams provides a depth of R&D expertise in gum technology and innovation which
can be combined with Cadbury Schweppes' confectionery approach and "know how"
to provide a leading edge innovation capability with the scale to capitalise on the
growth potential in the sector. There is a strong R&D pipeline to support future
innovation, combined with a global supply chain which can deliver the products to
market efficiently and cost effectively.
6. The Combination of Adams technology and Cadbury product portfolio would
provide potential high value candidates.
7. The acquisition will result in significant cost savings in manufacturing and supply
chain, procurement, IT and shared services and central administration costs. Around
70% of the cost benefits would be obtained from centrally controlled initiatives.
8. By leveraging purchasing and procurement there will be savings in media and
advertisement. By consolidating media buying in the USA, Canada, Mexico and by
consolidating ingredient procurements to obtain the lowest price for overall volumes.




Q.2 which synergies you believe and which ones are you sceptical about?
Answer-2
According to us following synergies will be effective:-
1. Cost Synergy
The combined company is estimated to cut the expenses by $553 million
by reconfiguring the Cadbury supply chain with the Adams one by shutting down
underutilized plants and transforming products to other centres.

The cost synergy is quite aptly calculated as synergising the operations and supply
chain will help both the companies to achieve economies of scale and also cut down
the redundancy occurring in post merger operations of both the operations.
2. Cost Benefits
The acquisition will result in significant cost savings in manufacturing
and supply chain, procurement, IT and shared services and central administration
costs. Around 70% of the cost benefits would be obtained from centrally controlled
initiatives.

The cost benefit which the firm thought about post merger is rightly calculated as the
centrally controlled initiative standing on the backbone of IT and shared services can
be leveraged by both the forms to optimize their cost benefits.

However we are sceptical about the benefits stated due to the acquisition
1. Revenue Synergy
Cadbury Schweppes expected $275 million in revenue synergies in
the U.S from the launch of two brands which would leverage Adams route-to-market
(RTM) and Cadbury confectionary expertise.

The premise of the revenue advantage which the merger is going to offer is Adams
dominance in gum market. Although the Adams acquisition had made Cadbury the
worlds biggest confectionery group, its global market share was just 10 per cent so
it retained only a slim lead over its competitors.
Also the acquisition and bid made for the deal was made keeping in mind the benefits
Cadbury is going to have in the areas of Adams by selling the confectionary through
the RTM i.e. route through market method. But there might be a difference in the
marketing mechanism of both the companies and it could lead to a misalignment and
thus reduction in the revenue generation.

2. Also the work culture of both the organization and management of talent pool post
merger could lead to problems in operational synergies and thus indirectly can hit
the revenue synergy.