Evaluation Impact On Financial Operations Cadburys And Kraft Marketing Essay

E military rank Impact On fiscal Ope rations Cadburys And kraft paper Marketing EssayChoosing the TopicAfter stop of every last(predicate) my fundamental cover in August 2010, I waited public treasury the next session to decide to submit a query and abstract project for the Oxford Brooke University. The causality for much(prenominal) delay was the pressure to complete iii professional papers in December session. This cut by dint of is likewise principal(prenominal) to me because I believe by having combination of some(prenominal) Profession devising and a degree allow uplift my carg superstarr.To base my project on ACCA provided me with a contention of 20 recommended topics to involve from. After demanding d adept the list, the topic that immediately attracted my attention was topic 19 which was The pecuniary and usable consequences of a merger between two organisations or of the scholarship of wiz organisation by an opposite.What attracted me the roughly ab come forward this topic was that, it was all very applicable to my studies as I am computeing to accompany m angiotensin converting enzymetary management after ACCA. I k rude(a) this topic will allow me to demonstrate out and learn the all important, analytical skills. Other reason to choose this topic was the much talked about acquirement of kraft and Cadbury in that respectfore it promote me to choose this topic. Another reason was availability of the enormous centre of selective education through the inter web and press release because of young release of krafts recent fourth quarter in the month on February 2011.Choosing the organisation erst I chose my topic, I had to choose an organisation to base my explore on. I chose kraft paper and Cadbury for my analysis it was an obvious choice as this was the acquisition that cause me to select this topic. This was one of the most controversial and largest takeovers in the year of 2010. I believed the takeover by th e 2nd Largest Food Giants in its industry would master the objective I had in mind for the project.Aims ObjectivesThe important objective of this report is to evaluate the consequences of the acquisition on the finance and operations aspect of kraft FOODS. The financial statements by themselves scarcely provide the numerical entropy which guide to be god by drawn graphs. The principal(prenominal) focus of this report, on that pointfore, is as followsTo essay the reasons for kraft to sword a strategic choice of acquiring Cadbury and whether it occupy the strategic fit as claimed by the chief ope military rank officer of KRAFT FOODS in impairment of financial and clientele operations.The consequence use of the research aims to analyse whether kraft paper is on the track to achieve its targets it promised its plump for supporters at the sentence of acquisition.Since financial information wasnt sufficient for my research, I need to review the strategic decisions d o by kraft for its subsidiary Cadbury after the acquisition a huge with the sail identified while integrating both business. The anticipated future of Cadbury on a lower floor(a) kraft Group.In order to achieve the aims mentioned supra, I have make qualitative analysis apply SFE (Suitability, Feasibility Acceptability) and Ashridge model on with quantitative analysis utilise financial ratios and linking both to get an overall picture.THE ORGANISTAION federation Profilekraft paperkraft paper Foods is the demesnes second largest pabulum comp all headquartered in North Field, Illinois manufactures and food merchandise encase food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged and grocery products.( KRAFT FOODS INC, 2009)The business was formed by James L. kraft paper and his four brothers who began by wholesaling door to door cheese business in Chicago. kraft paper therefore achieved addition by merging with othe r companies and affixs the coat of the business by expanding more product lines.( Wikimedia Foundation,2011)Being listed on NYSE, kraft paper now has approximately 127,000 employees worldwide. Kraft sells products to consumer in approximately 170 countries. At 31 December 2010, Kraft had operations in more than 75 countries and make products at 223 manufacturing and processing facilities worldwide. Kraft portfolio include el til now flaws with yearbook r so farues exceeding $1 trillion to each one Oreo, Nabisco and LU biscuits drawa and Cadbury chocolates Trident gum Jacobs and maxwell House coffees Philadelphia cream cheeses Kraft cheeses, dinners and dressings and Oscar Mayer meats. Kraft portfolio included approximately 70 brands which each generate annual value incomes of more than $100 zillion. (KRAFT FOODS INC, 2010)CadburyCadbury was a in the lead global independent business in the exciting world of confectionery, a large, growing, brand-led industry. With an outsta nding portfolio of chocolate, gum and nookiedy brands, the largest emerging markets business and a pore and experienced team up, Cadbury is committed to its long-term vision to be the worlds biggest and best confectionery company. Cadbury operated in more than 60 countries with a workforce of 46000. (Cadbury, 2008)Cadbury made its initiation by opening one ace shop by rear end Cadbury. As time progressed John Cadbury moved into the manufacturing of drinking chocolate and cocoa. Cadbury grew big through some organic gain and some mergers. During the counterbalance world war Cadbury started to achieve great success, its products were regarded as necessities and Cadbury were at their peak. Cadbury kept investing in technology, sensitive factories and in new products to re primary(prenominal) ahead of competition. With factories all over the world and a host of well known brand names it has become a household name in many countries. (Birminghamuk, (n.d.))INFORMATION GATHERING Sources of DataData finish be quiet for any research by the following waysPrimary look into downstairs primary research new information is collected via interviews, look into or questionnaire and so forth because information is collected first hand.Secondary inquiry Also known as Desk Research is gathered from information which has al examiney been provided but may not be for the same purpose. such(prenominal) information argon motive little to access and are my cheaper than carrying out primary research. Such information gathered should be analysed and screened properly so that it fits for the purpose.Kraft and Cadbury both world listed companies although listed in different countries were required to issue annual accounts for its stakeholders by Sarbanes Oxley and Companies House respective. These companies especially Kraft issued Interim Reports as per the stock list requirement. Therefore much of the quantitative and qualitative date was readily lendable for analysis. Hence I chose to use secondary data over primary. The only complication I confront apart from time pressure was obtaining in vogue(p) financial information for Cadbury (2009 accounts). Fortunately Kraft public relation team co-operated and emailed me 2008 and 2009 Cadbury annual accounts on my request. The following are the beginnings of secondary information I utilise for my projectAnnual and Interim monetary Accounts and ReportsThis is the main starting time I use for financial aspect of my business and to draw graphs. I had to use interim reports even to demonstrate impact of Cadbury acquisition on Kraft at each and every quarter due(p) to complexity of the business. Krafts annual accounts were available to view and download on Krafts Investors Website. that Cadbury financial statement isnt easily available. derriereThis is the source of limitless information thence it took me a lot of time to extract information which was relative to the point. for the first time it provided me the qualitative information which was missing or less in the financial statement of both entities. Secondly it also provided me information from a trine party or neutral point of view.Letters and ReportsUnder this source, I analyzed the documents sent by Kraft to Cadbury management or reports address to Kraft roleholder explaining them the strategic fit of Cadbury acquisition. These documents were available over the inter elucidate. program libraryI used study text published by Kaplan for ACCA to brush my skills and be of aid when I got confused during an analysis phase. Apart from my line of descent books I visited local library for reference books. As I mentioned precedent I didnt had an opportunity to visit British Library for the access of database such as Datamonitor and Mintel. However I was able to get access to Euromonitor through internet and used it as a tool to aid dis vex of the application of analytical tools regarding acquisition and both the entities. Data Collection MethodsIts easy to collect data, but skills are required to make sense of data and apply it for the purpose. It was a fiddly job to collect reliable authentic information to base my reports on. Any negligence on my behalf may cause me a failure in achieving the report objectives. I was cautious and took my time to read through all the information once before starting with my project.As this acquisition was of the biggest acquisition in the year 2010, too much was pen by the newspapers and media about it. Reading about the merger in 2011 gave me this judgment to do a project on Kraft and Cadbury, as Kraft were about to issue its fourth quarter terminuss. I started my data order by reading articles from local newspapers as well as papers or journal published in other counties. I viewed them retrospectively. The most prominent newspaper I viewed was Financial Times, Guardian, Reuters, Wall lane journal and Economists.After I got a general idea behind the acquisiti on and critics claiming the acquisition as a failure. I downloaded the fourth quarter as well as annual report. I need to know what did chief operating officer responded on the acquisition as it had been a year. Then I looked at financial data provided to support any statement by the chief operating officer.Internet provided me great deal of help in my project. I type in the citewords such as Cadbury Kraft in etc at www.google.com . Find the relevant articles and make notes as well as bookmarks of the WebPages if I needed to read it again for qualitative part of my research.I even visited many libraries in my local areas the librarian helped me by giving me advice on referencing as I had no idea on references. Unfortunately I couldnt make a trip to British Library to access database which could help me in my project. except I was pretty content with the amount of information I already collected to carry out my analysis.ReferencingI have used the HARVARD REFERENCING dodging for t he referencing in my research and to aid readability, I have cited the source down the stairs the paragraph if the whole paragraphs were written based on the same single source.Acquisition for KraftPre AcquisitionTo systematic analyse the strategic choice by Kraft to acquire Cadbury, I will be using Johnson and Scholes framework (Suitability, Feasibility and Acceptability Model). (Wu, 2010)SuitabilityKraft Foods Inc. being the second largest food company still looks for opportunities to grow and try to remain one of the market leaders in the industry and and to riddle risk by a diversified portfolio. Kraft believes in rapid expansion by acquiring other businesses. Kraft packed new strategy implemented by new CEO who believed low growth segment should be disposed of and adopt those strategies that will achieve rapid growth even by operator of acquisition .Kraft will look for businesses that will fig on its strengths and guide against its threats. Kraft has a successful track en roll of acquiring iconic brands and businesses and usefully using it for its expansion. We will be using one of the criteria of Ashridge model chthonic suitability. Under Ashridge model we will be examining two criteria whether Kraft has sufficient skills, resources and understanding of the Cadbury business and whether there are opportunities for helping to achieve critical success factors. (Steiner, 2009)Source Euromonitor One key reason for Kraft to acquire Cadbury was to penetrate in those growing markets where Cadbury has better base such as China, India and Mexico. Brands such as Cadbury Dairy Milk dominated such markets by a vast length canvasd to its rivals. Cadbury did get down 40% of its revenue from fast growing emerging market. Cadburys acquisition of Adams play a vital role to increase their market share in Latin America. Cadbury has experienced 12% growth in revenue in emerging market over five years (EUROMONITOR, 2008) this can be beneficial for Kraft as it intend s to use Cadbury s distribution mesh to sell its brands.(Cadbury, 2008)(Cadbury, 2009a)Kraft being aware of Cadbury s heritage and its salubrious confectionery business ranking and its iconic brands makes Cadbury globally number one in chocolate, gum and candy. By attaining all these eponymous brands Kraft will become a global great powerhouse in snacks, confectionery and cursorily meals with exceptional portfolio of leading brands in the world. Hence will be one step closer in achieving organic growth objective.FeasibilityUnder feasibility we would evaluate Krafts present before acquisition in terms of internal resources of the organization this can even be connected to Ashridge s model criteria of possessing sufficient resource by Predator Company. Kraft being second largest business in its industry has huge funds stockpile which reflects in its Cash flow debates of 2008 and 2009 ($1.24 million and 2.10 one thousand thousand respectively). Buts its worth mentioning the judicature of Krafts North American Pizza to clutch for total consideration of $3.7 gazillion contributed majorly to its last cash reserve. High cash reserve helps them to with acquisition greet and integration hail and any other ab convention make up. Apart from cash reserve Kraft does have reasonable current ratio of 1.04 reflecting its above average liquidity position then its peers. Although Cadbury has a laborious hold on overall emerging markets Kraft have a greater position in some markets such as brazil and Russia. As Kraft being a huge conglomerate business it has vast amount of resources in terms of specialist staff, a highly invested research and development teams and finance etc to back up Cadbury to face competition from other rivals such as Hershey and Mars. Kraft can eve use its power over major supermarket chains such Wal-Mart to increase shelf care for of Cadbury as majority of its gross revenue come from small convenient store. Kraft is even able to promo te Cadbury heritage brand more stringently due to available of immense resources. It would be worth mentioning the fact that billion dollar Kraft empire has been experiencing an average growth of impressive 5 % over period of four years to 2008 (where it achieved 13% growth than precedent year).(Daltorio, 2009)AcceptabilityTo carry on with a strategic choice it also need to be acceptable by the stake holders. As shareowners are key stakeholders their consent is highly important. Although Kraft ensure them the acquisition would result in increase in shareholders wealth as it fits in into its business culture, some shareholders have different opinion. One of the reasons for such conflict of pursuits is the fright of increase in companys geared wheel. By 2008 Kraft had a high geartrain of 1.34 (ratio) compare to its rival Nestle of (0.36). They fear by acquiring Cadbury, Kraft would issue more long-term debt that may adversely affect the gear ratio and hence increasing the fina ncial risk of the business and impact the capability of paying out dividends, hence damaging shareholders interest. The other reason for conflict of interest was the reaction from one of the biggest shareholders Warren Buffett of Berkshire Hathaway who regarded the acquisition as bad deal .He believed Kraft has overvalued Cadbury for purchase consideration and the disposal of pizza pie business to Nestle for $3.7 billion was a mistake. He firmly believed Kraft is paying high premium for the acquisition. One shareholders view didnt affected Krafts strategic choice and Kraft went ahead with the acquisition despite got rejected first time. (Barr, 2010)Ballast Businesses*CADBURY*Heartland BusinessesAlien BusinessValue trap BusinessSkills fortuneLowHighHighAccording to my analysis I think Kraft values Cadbury as Heartland Business asKraft has the skills to movement opportunities from Cadbury. (UNDER ASHRIDGE MODEL)ACQUISITION for KraftThe long clashing 5 month bout between Cadbury an d Kraft was finally over on 2nd February 2010 as Kraft clinches control over Cadbury by 72% holding. Kraft then took total control of Cadbury on June 2010. Cadbury shareholders had a deadline of 2nd February to accept Kraft offer of 500 pence in cash for each Cadbury share and 0.1874 new Kraft shares for each Cadbury share which altogether values each Cadbury share at 840 pence including a special 10 pence dividend. This sums up the total valuation of Cadbury business to approximate of 11.9 Billion ($19.4 Billion). Kraft offered this purchase determine on 19th of January after a long negotiation with Cadbury management. Kraft go throughk to make hostile takeover on 7th phratry by a holler worth 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share (valuing it 745 pence a share). However Cadbury rejected the bid immediately and regarded it derisory. Kraft sweetened the bid by raising the true offer and increasing the cash component from 40% to 60% to make it more appealing for Cadbury shareholders. (Cimlluca et al, 2010)http//graphics.thomsonreuters.com/0210/EZ_CBRY0210.gifI have extracted this graph from Thomson Reuters to illustrate the impact on the share price for both involved parties after the announcement of take-over. We divulge an increase of almost 40% in the market value of Cadbury. The increase in Cadburys share price was triggered by the initial announcement by Kraft of its intention to take over Cadbury in early September of 2009. The announcement was received well by Cadbury Shareholders causing an increase in demand and thereby price of the stock. However we see a descent in the share price of Kraft food at the time announcement (graph below), some analysts believe this was due to Warren Buffet dissatisfaction of Kraft Acquisition. He regarded the acquisition as bad deal, which caused chaos amongst other shareholder hence a price come upons. This price fall deteriorated the purchase price offered by Kraft which was immedi ately rejected by Roger Carr, Chairmen of Cadbury. http//graphics.thomsonreuters.com/0210/EZ_CBRY0210.gif(Wiggins, 2009)Source digital Look(Munya , 2010)http//data.moneycentral.msn.com/scripts/chrtsrv.dll?symbol=kftE1=0LPR=2C1=2C5=6C5D=1C6=2009C7=6C7D=1C8=2010D5=0D2=0D4=1DD=1width=612height=258CE=0CF=0palette=2AF=2KEY POINTS FOR FINANCIAL ANALYSISKraft foods acquired Cadbury plc in February2 2010. Hence Cadbury results are restricted to 10 months rather than full 12 years and its subject to fluctuate with moving exchange rates. Cadbury data was alter from IFRS (previously applied by Independent Cadbury) to U.S GAAP followed by its new boot Kraft Foods Inc. Cadbury previous years experiences couldnt be compared with unless comparison is made in percentile due to the size contrariety of both businesses. Kraft even revised its Net Revenue retrospectively 2009 onwards.Post AcquisitionFinancial stanceThe above graph represents s the growth and decline in sales over a period of 4 year s by means of lot. The 2010 information contains data post acquisition, specifically contribution from Cadbury of $9143 that has been converted using the exchange rate of $1.595 per 1.00 for the aid of analysis. It can clearly be celebrated the reason why Cadbury was so desirable by Kraft. Cadbury attained square growth from 2007. In June 2007 Cadbury introduced their Vision into Action plan which insisted in fortify their position in emerging market. This strategy was immediately effective and can be reflected in the graph. As stated earlier in this research report one of the key reasons for Kraft to acquire Cadbury was their better position in emerging market as compared to Kraft. Although Cadbury has just been acquired for 11 months under Kraft we see a marginal fall of 4% in Cadbury sales than its preceding years. This perhaps because Kraft maybe getting inform to Cadburys operation and network hence not utilizing Cadburys full potential. (Cadbury, 2009a)This graph explai ns what did Krafts CEO meant by GLOBAL POWER HOUSE. If we examine the two graphs we see a change in the revenue from developing and North American markets. The main reason for Kraft to takeover Cadbury was to derive maximum advantage of Cadburys strong hold in emerging market. Although Kraft is one of the largest companies in food industry it drives more than 57% of its revenue from its Home Market US. As US market is experiencing economic recession Kraft needed to adopt an effective strategy to broaden its operations globally. Hence Cadbury looked more attractive from Krafts perspective. Its worth mentioning that Cadbury earns more than 40% from the fast emerging markets portraying its position being better than Kraft.. It should be taken into consideration that fact that Kraft hasnt launched any new aggressive marketing scheme or any strategic step via Cadbury in emerging markets. In 2010 Kraft has go on to run Cadbury operation without making any major changes. Talking quanti tatively Cadbury boosted Krafts net revenue in emerging markets by $3382 million which can be seen clearly in the graph at the bottom. Krafts strengths in Russia, Brazil and China along with Cadbury great position in United Kingdom, India and Mexico has spread its revenue source which has reduce the risk of a recession modify Krafts sales .By acquiring Cadbury Kraft enhanced its distribution channel which became effective in the first year of acquisition and clearly be seen in the 2010 net revenue segments. In 2010 revenue from US market contributed less than 50% to Total Net Revenue minimizing the business risk control by recession. (Farrell et al, 2010)The above illustrated graphs represent the change in Krafts revenue source after the acquisition of Cadbury. Krafts adopt a rational approach and pursue the strategy of selling off less shekelsable brands and achieving quick growth by acquisition. Kraft faced fierce competition from private give chase companies in the cheese and packaged meat market. Therefore Kraft acquired Cadbury to various its revenue source as there were dangers of fall in revenue from its main segments. There is an increase of 16% in the contribution made by confectionery segment. This segment is a high potential growth segment and Kraft would like diverse its business risk by investing more in promotion of this segment. (Trefis, 2011)The Gross margin shows the amount of gross increase generated by the company as a percentage of the sales revenue. Kraft Gross Profit Margin has been plotted against each quarter from 2009.It can be analyzed by the graph that Kraft tried to maintain its Gross Profit Margin in middle 30s percentile despite economic downturn in US market and increase in raw materials Kraft is able to maintain its objective, the main grounds for such level gross usefulness margin was the acquisition. By acquiring Cadbury Kraft has widen its distribution network as Cadburys main selling networks are convenient stores ope n on High Street therefore reach of every individual.Talking in respect on cost of sales (100 Gross Profit Margin) Kraft will benefit from economies of scale especially regarding purchases as Kraft will be bag buying and using Cadbury suppliers rationally to minimise cost of sales as possible. (Szalai, 2011)Net Profit Margin is an indicator of profitability, calculated as net income or net profit divided by net revenue.As shown by the graph, we see a downward trend in the net profit margin against each quarter in 2010.Despite the fact that there has been a 27% increase in Net Revenue in 2010 as compared to its preceding year, we score a fall of 23% in net profit especially in the fourth quarters of 2009 and 2010 ($711m and $547 respectively. However in aggregate there has been an increase in the net profit from 2009. The major reason for such deteriorates result for the fourth quarter was the cost associated with integration between Kraft and Cadbury. The pizza business of Kraft did contributed to the net profit in 2009 , by the sale of its pizza business to Nestle ,Kraft has deprived itself from the unconditional contribution of its disposal component.(BBC, 2011)The Prime objective of making investment in any business is to obtain satis pulverisation hark back on superior invested. Hence, the return on chief city employed is used as a measure of success of a business in realizing this objective. Return on capital employed establishes the relationship between the profit and the capital employed. It is used to show the overall profitability and efficiency of the business.By analysing we see a fall in return on capital employed although the sales and net profit overall has increased except it hasnt increased by the proportion of investment made by KRAFT FOOD. As Mr. Warren Buffet feared that Kraft did overpay for the acquisition this can be reflected in diminish of return on capital employed. I have also included a graph showing fall in earning per share that illustrate the point of less return for the investors this maybe due to issue of new share to Cadbury shareholders. (Wilson , 2010)I have included this graph in my research report especially to breakdown the positive and negative contribution made by Cadbury to Kraft operating income in 2010 as compared to Kraft in 2009.As announced by CEO of Kraft Foods, Kraft is highly likely to expect $1 billion in incremental revenue synergies apart from $750 million in cost saving by 2013. In order to achieve the synergies Kraft has budgeted to go by $1.5 billion in the first three years following the acquisition to combine and integrate the two businesses and already incurred $657 million in 2010. As stated in Kraft Annual Account 2010, Kraft incurred and expensed work related fees of $218 millions in 2010 and $40 million in 2009.Kraft has recorded the mentioned be under selling, general and administrative expenses in Profit and Loss Statement (Statement of Comprehensive income). Howe ver in the above graphs include figures which has been given in the Kraft 2010 annual accounts analysis of operating profit rather than true(a) incurred cost as some cost have been taken under finance cost which hasnt been included in arriving at operating profit for 2010. This seems a draw back in the acquisition objective and maybe criticizes by its stakeholders as integration cost has reduced Krafts earning by 33%.(BBC, 2011)Liquidity ratio expresses a companys ability to repay short-term attributeors out of its total cash. The liquidity ratio is the result of dividing the total cash by short-term borrowings.This Graph represents the two liquidity ratio one normal current ratio and another quick test ratio. Unlike up-to-date ratio, quick ratio focus on the most liquid assets hence it exempt inventory from current asset while calculating ratio. around of the key points that need to be addressed before analysis of the graph are the disposal of the pizza business and all the ou tpouring(a) capital relating to it. We should also account for the current assets and current liabilities acquired by Kraft such as Net Receivable of $ 1333 m and Accounts Payable of $ 1605 m etc. Another point to be mentioned is that while calculating Quick ratio I havent excluded the deferred tax asset, while some analyst exclude deferred tax asset as they dont regard it liquid.We see a significant difference between both ratios as inventory has occupied much of the work capital. Comparing it to the last year it is almost consistent with the growing sales. We notice a slight deterioration in both the ratio of 2010. The $3.7 billion cash raised by disposal of the pizza business was used to pay cash component of the acquisition. The rise in the actually figure is in line with the growing and diverse sales (Kraft Foods Inc, 2010)Gearing symmetry is a measure of financial leverage, demonstrating the degree to which a firms activities are funded by owners funds versus creditors funds (investopedia).The above graph represents how much company has borrowed compare to equity raised by KRAFT FOODS.Kraft had issued a long term debt of $9.379 billion (net proceeds) to support the cash component of Cadbury of acquisition along with proceeds from Pizza Business. Kraft even made a repayment $2.1 billion of long term debt during the year. This has increased the total debt of the business from $18990 million to $28724 Million.Kraft has also issued 262 million shares to existing Cadbury shareholder as part of purchase consideration. This has enlarged Krafts share capital affecting the gearing ratio.By taking into consideration the above mentioned circumstances, we see an increase in the gearing ratio of 7%. This may cause some concerns amongst shareholders and lenders of Kraft as the financial risk of the business has increased as more interest will be paid from the profits available to pay dividends to shareholders. (Tradition Financial Concept.). This may even damage the creditability of KRAFT FOOD in lenders market as it has borrowed 80% to Equity, hence it may be charged high interest rate by the lenders in future.(Kraft Foods Inc, 2010)(Hoskins, 2010)Interest cover is a measure of the adequacy of a companys profits relative to interest payments on its debt. This ratio will help to explain the previously mentioned financial due to increase in gearing.Due to the increase in leverage we see a fall of 0.94 in interest cover which means there would be less profit available for dividends. This maybe is one of the reasons why Warren Buffet (one of the major shareholder in Kraft) reduced its stake from 9% to 6%. The ratio is over 2 which is considered strong by analyst and reflects Krafts strong position in borrowers market. However Fitch, one of reputed credit rating agency, has downgraded the default rating on both companies to BBB-. However its rivals havent downgraded the rating as yet but our reviewing if they should follow their peers. Flitch has downgraded the rating due to anticipated increase in financial leverage of the combined Kraft/Cadbury. (Peters et al, 2010)Operational Changes Post AcquisitionThe significant changes in operations along with their impact on KRAFT FOOD GROUP as a wholeClosure of Somerdale factoryDays after acquisition Kraft announced the closure of Cadbury factory in Bristol. During the acquisition struggle, Kraft promise to retain Somerdale Factory. The announcements created a chaos amongst Cadbury workforce and British Unite swop union as 400 employees were being made redundant. It would be worth mentioning Cadbury prior to its acquisition (in year 2007) had already announced the closure of its Somerdale factory as they had invested more than 100million in the production plant in Poland to be cost effective. However at the time of acquisition Kraft assured Cadbury stakeholders that it will keep the Somerdale factory running. Kraft tried to justify the closure by stating that they made a genuine a ttempt to keep it running but its irrevocable. This had a negative impact on the motivation of 5400 Cadbury employees working United Kingdom as they feared less job security .Kraft faced high criticism from British media which lead to boycot