Mergers and Acquisitions

Intro

At the beginning of the 21st century the future of the beverage and food industry seemed to be unclear. With a slow growth rate of only 2% per year, food and beverage companies were desperately seeking the ways to enhance sales and profits. Many companies such as Kellogg’s, Sara Lee, Quaker Oats and others considered merging to be a solution and thus the turn of the 21st century was marked by $ 30.5 billion worth of mega-mergers . One of the largest mergers was the merger between PepsiCo and Quaker Oats which occurred on August 2,2001. This biggest strategic decision PepsiCo Corporation ever made added not only the necessary boost in sales needed to attain tremendous growth, but also positioned company as a dominating force in the food and beverage industry. Detailed analysis of this decision, its impact on productivity and cost is presented below.

Analysis

In order to understand clearly the motivating factors of this decision, it would be useful to describe the nature and position of the two companies on the global market arena prior to the merger. Quaker Oats was formed in 1901 in Raven, Ohio by joining several oat-milling companies. Before the merger, 92% of Quaker Oats’ U.S. brands held number one and number two positions in