Amazon's attempt to 'Amazonify' Whole Foods by adding processed foods like Doritos and Pepsi highlights the brand clash that causes two-thirds of corporate acquisitions to fail. The strategy, which includes hiding junk food in back rooms, is a sign of impatience and a fundamental misunderstanding of the acquired brand's value.
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The most significant founder mistakes often arise from abandoning one's own judgment to do what is conventionally expected. Jason Fried notes that these errors feel worse because you aren't just failing, you're failing while trying to be someone else, which undermines the core identity of your company.
Preparing a company for acquisition can lead founders to make short-term decisions that please the acquirer but undermine the brand's core agility, setting it up for failure post-sale. The focus shifts from longevity to a transaction.
Founders should be wary of earn-out clauses. Acquirers can impose layers of pointless processes and overhead costs, tanking the profitability of a successful business and making it impossible for the founder to ever receive their earn-out payment.
The most critical contractual failure in The Laundress's sale to Unilever was the absence of a detailed transition plan. A vague clause to "keep doing what you do" created an ambiguous power vacuum, leading to operational chaos and the brand's post-acquisition implosion.
Jane Wurwand advises a premium food startup to avoid large supermarkets early on. Big chains demand high volume and have long payment cycles that can crush a new business. Instead, focus on small, high-end local grocers where the brand story can shine and payment terms are more manageable.
Instead of a formal M&A process, Unilever's initial contact was an executive visiting The Laundress's retail store and questioning staff. This unprofessional start was a red flag, foreshadowing the chaotic post-acquisition integration and lack of process that followed.
For 20 years, Netflix's identity was built on 'no ads, no live sports, and no big acquisitions.' Its recent reversal on all these fronts to maintain market dominance shows that adapting to new realities is more critical for long-term success than rigidly adhering to foundational principles.
During a merger, prioritize people over process. Technical integration is secondary to building trust between teams. Use simple, cultural activities like joint happy hours and "show-and-tells" about the tech stack to humanize the engineering effort and foster empathetic collaboration early on.
Coca-Cola failed with ZICO not by changing its core quality, but by stripping away its ability to adapt. Large corporate systems, built for consistency at scale, enforce rigid processes that stifle the very nimbleness that made a challenger brand successful.
For legacy companies in declining industries, a massive, 'bet the ranch' acquisition is not an offensive growth strategy but a defensive, existential one. The primary motivation is to gain scale and avoid becoming the smallest, most vulnerable player in a consolidating market, even if it requires stretching financially.
