Post-Acquisition Woes for Amazon and Whole Foods. How Can You Mitigate Risk?

Like many of you, we were astonished to hear the news of Amazon’s possible acquisition of Whole Foods when it was announced last summer.

Merging organizations with such vastly different operating models and mechanisms for connecting with their current and prospective clients takes skill, patience, persistence, understanding, fortitude, and humility.

While there are incredible strengths inherent in each of these organizations, what sets them apart in their unique marketplaces are differences of monumental importance to their individual and combined stakeholders. Vendors, suppliers, customers, and employees each connect with these companies for different reasons.

Bringing these two organizations together offers considerable risks and opportunities.  We posted a blog about this when it was first announced. A year into their integration efforts there are noticeable changes in Whole Foods stores, lots of signage in the stores, and the not-so-subtle marketing of the Amazon Echo.  And, if you are an Amazon Prime customer, like we are, you experience discounts on select Whole Foods products.

“Is the marriage working? Tough to tell at this point. Those promised changes may seem exciting for both parties but between disappointed shoppers and a “clash” in culture it may not have been what Whole Foods faithful wanted.”  A recent TechCrunch article shared a number of new and expected consumer benefits such as online ordering, curb-side pick-up service, door-to-door food delivery in select locations, and perhaps the highly anticipated future possibility of drone delivery of your Whole Foods purchases.  This same article also highlights some of the perceived disappointments of this corporate coupling, quoting Barclay's by referring to it as the ‘conventionalization’ of Whole Foods. These consumer impacts include reports of poorer quality produce and the elimination of previously available specialty products, among others.

For the staff members there appear to be a difference set of concerns.  “Some Whole Foods employees want to unionize to address what they say are changes to corporate culture and diminished compensation under the ownership of Inc..  A group of workers sent an email Thursday to workers at most of the 490 Whole Foods stores urging them to back their unionization drive”, says yesterday’s Wall Street Journal (WSJ).

We raised the caution flag about the potential for just such a possibility in an August 2017 post.  It is a significant challenge to bring two organizations together to achieve a cohesive whole. Amazon and Whole Foods can benefit from capitalizing on the unique market value and corporate cultures, which set these organizations apart from their peers.  However, combining them in a way which maximizes opportunity for all stakeholders is a daunting task. Especially in a world where even seemingly no-brainer M&A activity fails to meet its stated objectives 70-90% of the time.

You can get a leg-up on these issues by engaging in a comprehensive pre-transaction evaluation process, including structured human capital due diligence and purposeful people-related post-integration efforts.  Giving voice to your stakeholders, understanding the cultures of both organizations, and aligning them with your overall transaction strategies and intended deal outcomes are essential. There is no silver bullet which will guarantee that outcomes such as post-acquisition union organizing activity won’t happen, but there are a number of actions which can be taken to reduce these risks.

We wish both organizations, and all who hold them in esteem, the very best. We look forward to seeing what the future holds for each group, alone and as a collective whole. Perhaps, they will strike the delicate balance of carrying out a successful integration, and we, as loyal consumers, will be privy to a new and even stronger combined version of the two entities. Only time will tell, but we are hopeful!

How can we help you mitigate risk and reveal maximum potential in your deal-making activity? Drop us a line or give us a ring. We would love to learn more about you and your upcoming activities.

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