Ben & Jerry's share price decline and acquisition by competitors

Governance

Ben & Jerry

Governance in Ben and Jerry

Governance in Ben & Jerry

Governance in Ben & Jerry

The paper is about the governance, performance and market value of a brand named as Ben & Jerry. It is a multinational brand famous for its ice creams and other frozen products. The paper casts light upon the major events which leads to undervaluing its share prices and explains how the competitors planned to acquire Ben & Jerry.

From the business perspective, it is a natural phenomenon that a product has life cycle which has both boomed and depression periods. When a product is introduced, it passes through the phase of introduction, launch, popularity, high sales, innovation, and low sales. It is also possible that it may finally vanish away. The product may no longer exist in the market but brand remains there. It is loyalty with brand which attracts people to purchase products from particular seller and manufacturer. Commercial organizations go a long way to protect their brands.

For large organizations, serving across the globe, finances is a big issue and they go private limited. As they invite investment from open market, they need to give certain authority and rights to the shareholders. The shareholders earn when a brand performs well and they lose if there is any element of negativity in the market. It is important to mention that share price decrease may happen because of the factors that may not be directly related to the brand. There are uncountable factors which lead to change in share price, even rumors and psychological factors can turn the tables around.

Having established this background, it can be assumed that when share price is reduced, the giant competitors find it more favorable to acquire a small entity. The same happened in the case of Ben & Jerry. It was a profitable entity with operations in multiple countries of the world, enjoying prestige and customer loyalty. People loved to enjoy the brand of Ben & Jerry. Then the adversaries led to decrease in its share price which made it easy for giant competitors to initiate efforts of its acquisition.

Potential Acquirers and Their Plans

In the corporate world, joining hands for profitable relationships is also a practice. Profitable organizations keep an eye on the market performance of their competitors so that they can offer them partnership, merger or acquisition. Depending upon the size and performance of organizations, the type of deal is offered. However, for larger organizations, it is more profitable to acquire small competitors so that an established brand can be added in their portfolio. There are other motives for acquisition, e.g. resource acquisition, finance arrangements, synergy etc.

Acquisition maybe a profitable deal for a small firm but there are many constructs which discourage the small brands from dissolutions. The first and foremost point of consideration is related to brand protection. Organizations consider it an attack on their corporate identity that an organization wants to acquire them. Still, these practices continue and get successful as well because of the certain reasons which do not fall in the controllable domain of organizations.

The governance of organization is key factor which determines the plan of action for its present challenges and future vision. In private limited companies, where management is the representation of shareholders, and shareholders are the real owners of the organizations, agency issues are common. The practicing management may have different approach to run business while the wishes of shareholders are entirely different. If these two elements are not harmonized, there is possibility of huge conflict and the ultimate loss will go the organization itself. The shareholders will fire the management and they themselves will lose because of poor organizational performance.

As mentioned earlier, decrease in stock price paves way for giant competitor to acquire the firm. The increasing rumors about Ben & Jerry attracted many other ice-cream manufacturers to acquire the brand. The most important motivation behind this initiative was to acquire the values which were engraved in the culture of Ben & Jerry.

Since its establishment in 1978 (Unilever, 2012) till the end of century, Ben & Jerry actively participated in the activities of corporate social responsibility. It was one of the reasons for its popularity and customer loyalty. When it was accused of using artificial flavors, the customers were concerned about the quality of ice cream, yet they were not in the favor of losing its identity. They considered multinational organizations as purely focusing on the motive of profit and no value addition to society. The rumors about Ben & Jerry provided them an opportunity to acquire it and utilize its values for promotion of their products.

But the dream could not come true. The stakeholders ran an awareness campaign about selling of Ben & Jerry to Unilever which was the most expected multinational corporation to buy Ben & Jerry. Unilever offered 23% premium to buy Ben & Jerry (SUU, 2002). It appeared as an attractive offer to the shareholders. Unilever had many other brands of ice creams traded in European market.

It succeeded in acquiring Ben & Jerry but the founder had the firm stand that for Ben & Jerry to flourish, independence is the main requirement. It resulted into the fact that Unilever acquired Ben & Jerry yet it retained its Board of Directors to save the brand. He succeeded in his efforts and saved Ben & Jerry from dissolution in Unilever product line.

The present situation is, Unilever manages Ben & Jerry as one of its subsidiaries, yet Ben & Jerry has its brand alive under its independent board of directors. Ben & Jerry is still considered an environmental friendly organization, striving hard to produce best quality ice cream in the best possible manner (BenJerry, 2012). They have social insight and focus on value addition to society which makes their customers and employees loyal to them.