Going Out of Business and Selling Brands

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In recent news, Hostess picked a lead bidder for its famous snack cakes.  The bankrupt company said it has selected a joint offer from C. Dean Metropoulos & Co. and Apollo Global Management, LLC – as the lead bid for the snack cakes brand.   The two companies are offering $410 million for the brand and five bakeries.  There is still the potential for other competitors to bid on the auction floor.  The final approval of the sale will be at the judge’s discretion. 

In November, Hostess declared that it was going out of business and selling its brands, after years of management troubles and turnover.  Separate bidders for its other brands, drake’s cakes and wonder bread have already been announced.  Hostess suffered from changing tastes and lack of investment in marketing its brand.  When the announcement hit in November, stores couldn’t keep twinkies on the shelves.  The sold-out products reflect that consumers still have an interest in the snack cakes. 

While most people don’t really think of the twinkie as a staple in their diet, there is a business opportunity for someone to purchase the assets from Hostess.  Using an acquisition strategy of an already existing brand may be better than developing or designing one from scratch.  For example, entrepreneur Hamdi Ulukaya, Founder and CEO of Chobani Yogurt, came across an ad for a yogurt plant that had been shut down by Kraft and bought the plant the same day. 

Like Ulukaya, many entrepreneurs have been successful using the acquisition strategy to get started or to expand.  There are three ways that company founders buy brands and businesses and optimize on that acquisition strategy:  by buying for a better brand, buying for speed to market, and buying for new markets and technologies. 

Obviously purchasing a brand that is well known and already in the market place is a great strategic advantage.  For example, Gian Fulgoni, founder of ComScore acquired Media Metrix (the best known brand in the audience measurement industry).  Fulgoni had better technology, but Media Metrix’s brand was flashier on the outside.  When he acquired the company, he increased customers much faster than on ComScore’s brand alone. 

Glen Tullman, CEO of Allscripts, obtained 40 percent of his revenue from acquisitions.  In an interview with Forbes, Tullman advised that the only way to stay competitive and ahead of the curve was through acquisitions, because health care technology changes to quickly.  Getting out to the market quickly through the acquisition helped Allsripts to stay in business. 

Another example is Joe Mansueto, founder, chairman, and CEO of Morningstar (a financial products company) who is best known for starting his company from the ground.  However, he quietly made more than a dozen acquisitions which increased sales overnight.  

Source: www.bizjournals.comwww.forbes.com


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