FOREIGN DIRECT INVESTMENT CASE STUDY !1

!! !!!!!!!!!!!!!!!!!!UNILEVER & ALBERTO CULVER: FDI CASE STUDY !

The Archetypal Model: Unilever and a Major Global Acquisition !Kyron Richard !

University of Southern California

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The Archetypal Model: Unilever and a Major Global Acquisition ! Though the Anglo-Dutch conglomerate, Unilever, it is most recognized for its significant

market share of the food and consumer industry, it had a stake in the personal care industry

before 2010 with market leaders like Dove and Suave. However, it made attempts to it expand

into this, more profitable, industry through the acquisition of an American company Alberto

Culver. Culver had strong standing in the United States, and promising for other emerging

markets in Latin America, which holds high hopes for Unilever, (Sonne & Byron, 2010). Martin

Deboo, an analyst with Investec Securities, highlighted a major impact the Culver acquisition

could have on Unilever’s business, “Personal care brands are easier to globalize than food brands

because consumers tend to have the same needs in common. But food is quite different, in that

culinary tastes differ from region to region” (Bawden, 2010). This information is particularly

important for a company that sells products in 170 countries, and the profitability possibilities

are virtually endless.

Unfortunately for executives at Unilever, some of their stakeholders were not excited

about the opportunity, or found it too lucrative. The four central stakeholders in this case include

governmental regulation entities, Alberto Culver’s employees, Alberto Culver’s shareholders and

Unilever’s own shareholders. The former is important because governments take extreme caution

to conglomerates which have what they deem to be too significant market shares in certain

industreis, which endangers fair pricing. Culver’s employees and shareholders not only

determine the value of the company but also how productive it is. If the react negatively it could

endanger the acquisition, or have an impact on the final group, Unilever’s shareholders who may

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not approve of the deal or might feel threatened at a negative reaction from Culver’s staff and

investors.

Government officials recognized the possibility for Unilever to have a significant

monopoly on the hair product market, and the Antitrust Division of the Department of Justice

filed a lawsuit in May 2011, seven months after the companies had agreed to a selling price of

around 3.7 billion. According to the Department of Justice, the sale would have a negative

impact for, “In the case of value shampoo and conditioner it would reduce the number of

significant competitors in the value shampoo and conditioner markets from three to two, leaving

Unilever with approximately 90 percent of those markets” (Justice, 2011). This loss of

competition is of great importance to governmental regulators who want to maintain a

competitive market landscape and ensure fair pricing for consumers.

Though there were initial complications with the acquisition, the parties soon reached a

compromise and, “Under the terms of the agreement with the US DOJ, Unilever will divest the

Alberto VO5 brand in the United States from the Alberto Culver portfolio and the Rave brand

from its own portfolio” (Financial, 2011). There was still another hurdle to be jumped over. One

other important stakeholder that Unilever failed to receive support from was the employees of

Alberto Culver. A statement was made by Dan Stone, the Vice President of corporate

communications for Alberto Culver who said in 2010, “his team is not working closely with

Unilever, since ‘the company is still a competitor’ until the [deal closes]” (Bruell, 2010). This

attitude is important for Unliever, since integration of the brands is important to the acquisition.

The Unilever case is an archetypal model for the various barriers to investment for companies.

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Works Cited

Bawden, T. (2010, Sep 28). Unilever spends pounds 2.3bn to acquire US toiletries firm: Alberto culver deal brings high-margin hair products anglo-dutch firm will aim to cut costs by $160m. The Guardian. Retrieved from http://search.proquest.com/docview/755253594?accountid=14749 !

Bruell, A. (2010, 11). Alberto culver comms not yet under unilever. PRweek, 13, 7. Retrieved from http://search.proquest.com/docview/864730294?accountid=14749 !

Financial markets; unilever receives approval to acquire alberto culver. (2011). Economics & Business Week, , 151. Retrieved from http://search.proquest.com/docview/867394979?accountid=14749 !

Justice department requires divestitures in unilever's acquisition of alberto-culver company. (2011, May 06). Targeted News Service. Retrieved from http://search.proquest.com/docview/865065839?accountid=14749 !

Sonne, P., & Byron, A. (2010, Sept 28). Unilever primps for the hair aisle: Proposed alberto culver acquisition would set up challenge to p&g, l'oréal. The Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10001424052748704654004575517162530733910 !