Burgers, coffee and fried chicken will soon be under one roof. Restaurant Brands International Inc., the parent company of Burger King and Tim Hortons is acquiring Popeyes for $1.8 billion. The deal is expected to close in April.

Restaurant Brands hopes to use its global reach to expand Popeyes restaurants internationally. Currently, Popeyes, which primarily sells fried chicken, has over 2,000 restaurants worldwide with 1,600 located in the U.S. Popeyes revenue in 2015 was $259 million.

3G Capital, a Brazilian private equity firm, owns a 43% stake in Restaurant Brands, and has orchestrated multiple acquisitions of U.S. consumer companies, including Burger King’s acquisition of Tim Hortons in 2014 which formed Restaurant Brands, and the Kraft – Heinz merger in 2015. Earlier this week Kraft – Heinz attempted to acquire Unilever for $143 billion but was rejected. 3G Capital tends to “squeeze” profits out of its acquisitions through cost cutting and leveraging economies of scale. The real question this time will be if 3G can grow Popeyes into an international brand to rival the most dominant chicken fast food restaurants, which include Chick-fil-A, which is privately owned, and KFC, which is owned by Yum! Brands Inc.

Photo credit: Mike Mozart via Flickr cc

Effective leadership plays a critical role in integrating companies following an acquisition. Challenges abound, for instance when disagreements arise between the executive team and the rest of the staff. How do you bridge the gap? Communicate painful decisions? Maintain calm during a period of change?

As the leader of an integration process, you should:

  • Be aware of the key challenges and opportunities
  • Recognize that different management styles can bring new value to the combined organization.
  • Be good listeners. Those who aren’t decision-makers need to be heard and to hear from their leaders in response.

Leaders who bulldoze their way through integration breed resistance within the acquired company and are likely to be frustrated by a lack of progress. This can be avoided by adopting a collaborative approach.

That isn’t to suggest that as a leader you should simply acquiesce, but rather that you balance the input of executives and employees and make decisions that best serve the interests of the organization.

Leaders choose which issues may be negotiated, and which are beyond discussion. They must clearly communicate how decisions will be made and how information will be disseminated.

Consider the challenges of integrating Kraft and Heinz following completion of their merger last July.  The Wall Street Journal reports Kraft Heinz is closing seven facilities, including Kraft’s former headquarters near Chicago, and cutting 2,600 jobs. In situations like that, leaders must make tough choices, combining two companies with strong cultures and entrenched staff. Cost cutting, innovation and automation may be essential to the success of the integration, but so is the way in which these dramatic changes are implemented.

The quality of leadership can make or break an integration program.

Recently, there have been some fairly significant transactions, and I want to mention these and tell you what they may mean for corporate executives.

The first deal we have is Berkshire Hathaway and 3G Capital acquiring Heinz for $23.2 billion. Really, if you include debt, that transaction looks to be just under a $30 billion transaction.  There are two fundamental reasons why this deal is going on. One is the belief that brand names are important and a great differentiator in many markets.

The second reason is that Heinz has a significant platform and provides a great opportunity for growth. There is particular opportunity on a global basis to leverage, not only the brand name, but also the infrastructure and capabilities that Heinz brings to the table.

This growth may not be in the US. That’s not to say there is no growth in the US, but there’s a belief that there’s significant opportunity to continue leveraging the Heinz platform in emerging markets.

The second deal, which was announced a few weeks ago, is Office Depot acquiring OfficeMax. Technically this transaction is a merger, so the deal will be trading stock for stock and not cash. However, valuation still has to take place and the deal is valued around $976 million.

Once again, we’re continuing to see something I’ve been talking about: very strategic transactions.  In the marketplace, Staples is the market leader with about 40% market share, Office Depot is number two with about 20% market share, then OfficeMax with about 15%. So combined, the newly merged Office Depot and OfficeMax will be a much more significant player, just a little bit behind Staples, with 35% market share.

If you are a buyer and know strategically what you want to do, there are three things likely to impact your plans:

1)      Low Interest Rates: Assuming you’ve got a strong balance sheet and have the ability to attract, in particular, senior debt financing, now is a good opportunity to start leveraging your balance sheet.

2)      No Growth: For most companies and most markets, especially here in the US, there is no significant growth.

3)      Excess Cash: There’s a lot of excess cash out in the marketplace.

To me, those three factors create a recipe for a continuation of strategic transactions.

Also, keep in mind that regardless of what the fundamentals say you should be doing from a financial or strategic position, the reality is we have a marketplace where most CEOs react to what other CEOs are doing. When people see major transactions like the Office Depot— OfficeMax merger, I guarantee you they’re going to start talking about it more in their board meetings.  We will begin to see more activity.

I have been saying for some time that this year is going to be a very strong year for M&A. I still think there is a window of opportunity for strategic acquisitions. Assuming you have a solid plan, I encourage you to really consider the timing of when you’re going to take action.

On the other side, my concern is that looking ahead, say into 2014, we are may start seeing people overpay because of that recipe I just talked about. More on that in later posts. Meanwhile, that’s a little bit of what I see going right now in the M&A world.

Photo Credit: daysofthundr46 via Compfight cc