Summary
Sara Lee says they want to buy some new businesses at the same time they are cutting $250MM from costs. Their main complaints are about their stock price.
Analysis
The road is littered with failed acquisitions, no less in the food business than in any other. Especially when such acquisitions come from a position of weakness or from concerns about the street, although that is not the only time. Of course there were the giant screwups like Quaker's near-destruction of Snapple, which led to Quaker's collapse. Some even challenge the intelligence of the P&G-Gillette deal.
But on a less dramatic scale we have seen over and over good solid brands be footballed around and lose share to the competition on the meanwhile. If the owners of great longstanding brands like Koolaid had focused on their business opportunities, there might not be any Vitaminwater, which tastes about the same. Life Savers and other great brands have been passed around the room again and again. It seems like the British Reckitt Benckiser has more respect for the value of US brands than the US companies do.
My first reaction is that Sara Lee has a great stable of brands, and learning how to maximize those should be their core priority. If they can't find the answers in their own deep history, they are unlikely to find it on the panty shelves of other companies. The billions that would likely be spent on an acquisition could go a long way in developing and marketing new products or taking existing products into new markets.
This does not mean that there might not be acquisition opportunities for Sara Lee, but I would watch them closely. Remember Carly Fiorina seeking that "transformative acquisition" when she bought Compaq. And hope that Sara Lee internally getd their house in order (from the viewpoint of market share growth, not just cost containment) before taking on new operations.
Many of the advisors and investment bankers that are around the Board meetings have nothing to gain from internal, organic growth. See my blog post on the drug industry's misguided ambitions at http://hooversworld.com/archives/2653?day=Friday.
