When you think of the historic drought and California and diseased livestock in the Midwest, you are not likely to see the two events as catalysts for mergers and acquisitions. In fact, you may see them as potential detriments to produce companies and meat processing firms.
Nevertheless, these events may fuel the ongoing frenzy of mergers and acquisitions that we have reported on in prior posts. This is a different rationale than the desire to avoid taxes (i.e. mergers with foreign entities), remaking a brand image, or trying to survive among goliaths (i.e. airline mergers).
The recent announcement of Tyson Foods $6.3 billion acquisition of Hillshire Foods may be an example of two of these factors. On the one hand, Tyson may be hedging its bets against tough economic circumstances continuing, which could ultimately lead to its demise. On the other hand, Tyson may be trying to compete with other goliaths in the industry.
The shortages in commodities such as limes and avocadoes and the lack of available pork presumably makes the acquisition a good idea. After all, when a company faces a shrinking market because of commodity shortages, it may be best to acquire a company that produces similar products to eliminate some competition.
At the same time, it is hard to ignore the other major acquisitions in the food industry. Sysco and U.S. Foods are set to complete an $8.2 billion merger and in 2013, a Chinese company purchased Smithfield Foods, which was the largest producer of pork products.
All of this indicates that mergers and acquisitions are expected to continue at a brisk pace across industries. If you see an acquisition as part of your future agenda, having an experienced attorney to guide you in the process is critical. The attorneys at Shulman, Hodges & Bastian can advise you.