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What happens when a touted acquisition doesn't work out?

With the flood of mergers and acquisitions taking place this year, it is unrealistic to believe that all of them will be successful. Indeed, companies don’t plan to acquire assets (or competitors) without a strategic plan that must be reviewed and approved by executives and shareholders. However, when an acquisition does not pan out as expected, time can be of the essence in pulling the plug.

Such was likely the case with ConAgra Food’s announced sale of its private label holdings. ConAgra’s purchase of Ralcorp Holdings nearly three years ago came with a great deal of fanfare. 

It was the company’s first foray into the private label market, and it drew a great deal of criticism from those who did not believe that ConAgra was doing its shareholders any favors by investing in non-name brands, even though it owns a plethora of name brand goods, including Orville Redenbacher’s, Hunt’s, Slim Jim and Chef Boyardee.

Nevertheless, ConAgra took the risk, and it appears that it did not work out despite the private labels  posting $3.6 billion in revenue over the past year. However, what may not be a good fit for one company may be a golden opportunity for another. According to a Forbes.com report, the potential buyer, TreeHouse Foods, stands to double its overall revenue and boost its profitability.  Moreover, the acquisition stands to further TreeHouse’s goal of consolidating its supply of private label brands. So while the acquisition appears to be a perfect opportunity, it remains to be seen whether it will work out as expected. 

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