The Benefits of Merging a Mid-Market Firm With a Startup

Business leaders have used a variety of strategies in recent months to generate cost efficiencies and remain competitive, including splitting into separate companies and relocating headquarters outside the U.S. But one that hasn’t gotten as much play, but can be equally as lucrative, is merging with a nimble, entrepreneurially-minded company. Adding new thinkers to your wheelhouse can provide pivotal advantages for both sides, including experience and resources—financial and otherwise—for the smaller firm, and innovation, imagination and possibly a faster time to market for your organization.

“Adding new thinkers to your wheelhouse can provide pivotal advantages for both sides.”

Leading this pack and providing case studies to learn from is the consumer packaged goods industry. Overall growth in the sector, especially in western markets, has slowed, forcing big food, beverage and health- and housewares companies to scout for solutions. In this arena, large companies have been chasing and swallowing startups for several years already, and the trend is becoming more prominent as chief continue to look for competitive alternatives.

One of the biggest splashes in this regard was by Campbell Soup which, struggling with stagnation in its primary market of ready-to-eat soup, reached out to snap up two of the most sterling small enterprises in better-for-you foods: Bolthouse Farm and Plum Organics. CEO Denise Morrison has applied essentially the same strategy to each acquisition—allowing the companies to run autonomously and keep doing what they did best, gaining sales and even share in fast-growing markets, while also weaving relationships with the larger company in areas  ranging from product development to distribution.

This is a strategy that could prove very beneficial for companies in manufacturing, pharmaceuticals, technology, even automotive and engineering.

Plum Organics CEO Neil Grimmer told CEO Briefing that this approach already has borne fruit for both firms. “We’ve been part of Campbell Soup now for over a year,” he said. “It’s been a fantastic relationship” so far. Morrison and he have begun to gradually mesh the two companies’ strengths and capabilities to close needs and gaps on both sides—a huge part of Campbell’s rationale for buying the $93-million leader in the fast-growing kids’ snacks and organic products industries.

“After six months of getting to know each other, now we’re focusing on finding ways to leverage each other’s strengths.”

“We spent the first six months making sure we got to know each other’s organization before we did any collaboration across departments,” Grimmer continues. “Now what we’ve really been focusing on is finding ways to leverage each other’s strengths.”

For example, he said, Plum “benefits greatly” from the well-established relationships that Campbell enjoys with retailers and from its broad capabilities in distribution infrastructure, production, warehousing, freight and logistics. Meanwhile, Grimmer noted, Plum is “a small, innovative challenger brand with speed to market, a mission orientation, and a passionate culture. These are all infectious things we hope to bring to the broader Campbell organization while making sure that the magic and mission of Plum stay as true as when we started the company.”

And soon, Grimmer said, consumers will begin to see some hybridization of the two companies, stemming from all of the above. “Our innovation teams get together and share ideas, and so there is cross-pollination happening,” he said.

The first result? Plum soup. “This will be an exciting launch for us that clearly leverages some of their capabilities at Campbell Soup, and also will bring what Plum does best to the soup aisle.”

 

" Dale Buss : Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other business publications. He lives in Michigan.."