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Politics and Business: a Bad Mix

January 25, 2010

We've seen of late an unprecedented mingling of business and politics that most would agree has been bad for both. The success of Kraft and the failure of Hershey to execute a successful bid for Cadbury is another case of where business and politics met with poor results. The politics in this case is local and Pennsylvania state politics that resulted in the failed acquisition of Hershey by Wrigley in 2002 and continues to limit management's options in acquisitions or mergers today. The Hershey Trust's insistence on maintaining control of the company that has funded its operations for the better part of a century has seriously limited its future.

I have previously speculated in this blog about a merger between Hershey and Cadbury. The fact that Hershey's board approved an offer for Cadbury earlier this month showed their intent to have the little fish swallow the big fish. But disagreement between the Hershey Trust board, that owns the majority of Hershey shares and made the decision in 2001 to bring in outside management for the first time in the company's history, and the management team that was the result of that decision, led to inaction.

A Cadbury merger was the right thing to do, just as was the acquisition of Hershey by Wrigley in 2002. That decision was also scuttled because of political disagreement between the trust board, the management, the citizens of the Hershey area, and the Commonwealth of PA. To mitigate the latter occurring again, the boards now include a former state attorney general and a former governor. Despite intent and political connections, Hershey couldn't pull it off.

The Wall Street Journal has speculated on Hershey's options and listed one as being acquired by Nestle. This would provide some entry to markets outside of North American, but it would do so by combining Hershey's iconic US brands with Nestle's weaker brands, some of which Hershey chose not to acquire in the past. And for those who fought to stop the acquisition by Wrigley, which would have been a good one for the community, a Nestle acquisition could be a community disaster.

The January 20 headline in the Journal sums it up: "Hershey, on Its Own, Has Limited Options". I agree, it's too bad, and it needn't have been this way had politics and business not been mixed.

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Keith Campbell
About Keith Campbell
Leaders learn from the past while looking to the future - and bring both to bear on the here and now. This is the philosophy that has steered Keith Campbell's 30+ years in manufacturing. It has worked for him in operations, maintenance, engineering, R&D, education, consulting and professional organizations--and now he's putting it to work for you--taking you to the edge of his thoughts on packaging operations.
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