A stakeholder if
an individual or group of individuals that is affected by/able to influence on
a business organisation. They can be internal (shareholders, managers,
employees) or external (suppliers, customers, lenders).
Shareholders
A shareholder is a
very important stakeholder, they are internal and therefore any decisions can
affect them directly, especially in a takeover. A shareholder’s main priority
is that the company is making profit which in turn will give them high
dividends. During the takeover of Cadbury, the shareholders played a main part
as Kraft needed 51% of shareholders to accept an offer in order for Kraft to
gain control of Cadbury. To attract shareholders, Kraft offered 840p-a-share
bid, sweetened by a previously promised 10p "special dividend", this
was a 3.3% on the original share price of 761p. In the short term, this would
keep the present Cadbury shareholders happy as this would enable them to sell
shares at a premium price above market value allowing the shareholder to make a
profit. On the other hand, in the short term current Kraft shareholder may not
benefit as much due to the rising costs of integration thus the company may not
be able to pay them high dividends. However, there is an opportunity for Kraft
shareholders to sell their shares if not satisfied, but this may affect them in
the long term as they will no longer be more receiving any future dividends.
Employees
Employees are also
an internal stakeholders and will be affected by changing cultures between the
two firms, new aims and objectives and new organisational structures. The main
issue that concerns employees whilst undergoing a takeover/merge is their job
security, amongst other aspects such as high pay, job enrichment and
promotional opportunities. Additionally, integration costs are very high up to
$1.5million, therefore the company may consider ways of cutting costs such as
making redundancies through retrenchment. Retrenchment is where a firm cuts
back on its scale of operation in order to cut costs which can be accomplished
through many strategies. For example,
before the takeover, Cadbury employed around 7,000 people across 8 UK sites.
Even so, after the acquisition, there were growing fears that Kraft would cut
jobs in order to save costs. Fear increased amongst the employees and affected
them in many ways such as motivation and production. Employees may have felt
undervalued therefore believing they should not put as much effort into work as
the firm does not deserve it. Additionally, due to rising anxiety for their
job, trade unions sparked concerns thus introduced many protests consequently
stopping production which would lead to even more increased costs. There was
confirmation of retrenchment with the closer of the Somerdale factory hence the
loss of 400 jobs. As redundancies have already been made, this has
understandably affected the morale of other present employees. However, cutting
back costs are essential for a merger/takeover whether it be through
redundancies or closure of factories in order for the firm to be more
efficient. Not only this put Kraft were forced to pay high redundancy payments
to employees for their whole time at Cadbury rather just for when Kraft took
over.
CustomersCustomers are an external stakeholder, due to the nature of the product, customers play a crucial part. A change of ownership by a takeover/merger may affect the customers, as the nature of the product may change as operations and production would alter thus increasing the likelihood of a drop in sales. For example, Kraft Foods are an American firm that was originally known for cheese, acquired Cadbury, a large British confectionary company. This act faced a widespread disapproval from the British public as well as prominent trade unions. Despite protests and public outcry, the acquisition still occurred which may have affected the reputation of Cadbury after the takeover thus a result in loss of sales. This is shown by the fourth quarter net profit that fell 24%. Furthermore, Cadbury was a heritage brand and the change of ownership implies that there may be a change in recipe thus reinforces the likelihood of fewer purchases within the UK market. Not only this, customers are also concerned with the price. An initial reason for a takeover is for rapid growth, a result of this is economies of scale which the company can benefit greatly can it can lower unit costs that the customers can also benefit from as price reductions can be passed on.
In conclusion, during a takeover many people will be affected whether they are from within or outside of the firm, however some people such as shareholders and employees will be more affected than others. Shareholders invest within the company therefore without their investment, the firm would receive no extra capital other than selling its products. Shareholders are the most powerful stakeholders as each own a part of the firm, they need to be satisfied as this can help improve the reputation of the company thus encouraging more investment from others that the firm can use in thing such as research and development. In the short term, Kraft shareholders may not have been pleased about the takeover as there was high integration costs thus taking away the capital that could have been paid through dividends. However in the long term, as profits start to rise and there a fewer costs to cover, they may benefit greatly through high dividends in the future. Cadbury shareholders benefited from a higher share price of 840p plus special dividends. This clearly satisfied them as the offer was taken and the hostile takeover followed through. Despite this, stakeholders such as employees and customers were not as satisfied. Employees suffered fear from losing their job as Kraft made cuts through redundancies in order to lower costs of taking over. Furthermore, customers were bitter about the takeover as they felt as though their British heritage was being threatened.
http://en.wikipedia.org/wiki/Kraft_Foods#Beginnings_for_Kraft
http://news.bbc.co.uk/1/hi/england/west_midlands/8456737.stm
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