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Focus Areas for M&A Success in 2024 and Beyond

3 minute read

As an immediate aftereffect of the pandemic, food and beverage (F&B) organizations were heavily focused on diversification and supply chain optimization. The school of thought was that a diversified product assortment and resilient supply chain would provide protection for disruptive events in the future. Now, years later, organizations are shifting priorities and turning their attention to strategic growth.

This has led to a surge in M&A activity. However, F&B organizations are approaching M&A differently than in the past. In this article, we’ll highlight where companies are focusing for M&A success in 2024 and beyond.

#1: Depth over breadth

A current trend is transactions that deepen a category presence. Rather than diversifying to provide protection for highs and lows, companies are prioritizing deals that fill needs in a specific category.

There are numerous examples of this from the past year. J.M. Smucker acquired Hostess Brands to expand its convenience products, Kellogg split into Kellanova and WK Kellogg to hone different offerings, and Ferrera bought Jelly Belly to capture more of the candy category.

“Expect to see more deals going this direction,” said Senior Vice President Geoff Coltman. “The F&B industry is highly competitive, and becoming a leader means you need to fill gaps in a certain space if you want to win more market share.”

Catena Solutions has firsthand experience of this trend. We’re leading initiatives for a growing snack bar brand including creating post-acquisition supply chain finance visibility and bringing repack operations in house as the company expands their health division.

#2: SKU rationalization

The next priority area is SKU rationalization. SKU rationalization entails evaluating SKUs in a product portfolio and deciding what to keep. It’s rooted in the 80/20 principle—80% of sales comes from 20% of products.

Companies are placing a greater emphasis on that 20%, which manifests in selling brands and products that don’t strategically align. An example is Unilever spinning off their cold chain to reduce complexity and increase sales.

SKU rationalization is a catalyst for M&A activity as it leads to a “shuffling” of products amongst competitors. It’s becoming easier to buy brands through smaller transactions than years-long mega deals or new product development.

“When you factor in R&D, prototyping, testing, marketing, and other costs, product development isn’t always feasible,” said Vice President of Delivery Dave Minor. “If a company wants to expand offerings in a category, and a competitor is selling a brand that fits the profile, it’s a no brainer to go that route instead of creating something new.”

#3: Revenue Growth Center of Excellence

Historically, M&A deals have progressed from the top down. Now and in the future, however, expect to see more Revenue Growth Centers of Excellence (CoE) involved in M&A activity.

A Revenue Growth CoE ensures cross-functional collaboration on specific revenue goals. These CoEs contribute to M&A by looking at potential deals holistically rather than initiatives being driven by leadership or a singular department.

This means for M&A initiatives, stakeholders from all departments—including IT, marketing, HR, legal, procurement, and manufacturing—will be involved in the process.

“We’re seeing more companies implement a Revenue Growth CoE to advise and collaborate on deals,” said Revenue Growth Excellence Practice Director Rich Medrano. “This way, stakeholders can look at M&A activity from every angle and determine if a deal aligns strategically, if the organization has the right resources, how each individual will be impacted, and what’s needed to ensure smooth integration.”

#4: Change management

Though M&A activity is on the rise, success can be elusive.

One of the biggest contributors to failure is a lack of change management. During M&A initiatives, employees experience significant disruption to their work. Bringing on experienced change management resources to help with the transition reduces resistance and turnover, creates cultural alignment, and improves operational efficiencies.

“When a larger organization acquires a smaller one, leaders might think the smaller one will absorb seamlessly into the larger one,” said Human Capital Practice Lead Matt Wessels. “This never happens on its own. Organizations must invest proper time and resources into change management and training for successful integration.”

The good news is that change management is trending upward along with M&A deals. According to PwC’s latest M&A Integration Survey, more companies are launching change management earlier in a deal lifecycle, with 43% including it before due diligence in 2022, compared to 23% in 2019.

We anticipate even more companies implementing change management as organizations realize effective transformation is dependent on setting employees up for success.

By aligning these four strategic priorities, companies can better navigate the complexities of M&A and achieve sustainable growth in an increasingly competitive market. As the landscape continues to shift, those that adapt and apply these focused strategies will be best positioned for long-term success. See how Catena Solutions can help your strategic initiatives here.