Background of Companies
To investigate the process of the acquisition, it is essential to give a context and analyze the business of both companies. Tedeschi Food Shops Inc. is a retail family company that, in 2015, owned around 200 shops in Massachusetts and New Hampshire states in the US (Taryn, 2015). The company was also one of the last remaining convenience shop chains that were owned by the local American stakeholders. Tedeschi Food Shops Inc. was based in Rockland, Massachusetts, and reported to gain more than 600 million dollars in revenues annually (“7-Eleven to take on Tedeschi,” 2015). Tedeschi Food Shops company was able to evolve and enhance its brand over the years of operations. It was known for its broad customer base, resilience in various situations, and complimentary services in stores (“Matrix announces the successful sale,” 2015). Therefore, Tedeschi was a famous brand with strong consumer loyalty and consistent operations.
7-Eleven Inc. is a Japanese-American retailer based in Dallas, Texas that owns the largest convenience store chain in the world (“7-Eleven is 70,000 stores strong,” 2020). In 2015, 7-Eleven Inc. operated and franchised around 160 stores in New Hampshire and Boston, Massachusetts, areas. In 2013, 7-Eleven reported a total amount of 84.5 billion dollars in sales annually in the world (“7-Eleven acquires Tedeschi,” 2015). During the time of the acquisition, the US retail market shifted towards convenience stores’ growing trend in popularity among customers that accounted for 34% of all retail shops in the country (“7-Eleven acquires Tedeschi,” 2015). Thus, 7-Eleven had extensive experience and market presence to manage convenience stores around the world successfully.
Reasons for the Purchase
There were several reasons for the acquisition of Tedeschi Food Shops by 7-Eleven to happen. Reporters suggested that both companies had a significant overlap in their services and business activities (“USA: Tedeschi network,” 2015). Tedeschi Food Shops and 7-Eleven Inc. had convenience shops in the same states, New Hampshire and Massachusetts, and had almost the same number of stores (“7-Eleven completes the acquisition,” 2015). Executive Vice President and Chief Financial Officer (CFO) of 7-Eleven, Stan Reynolds told that “Tedeschi is a respected brand and this acquisition fits in perfectly with 7-Eleven’s growth strategy.” (CSD, 2015, para.7). Thus, one of the reasons for the acquisition was a good match between companies that allowed the process to happen.
Another reason that was the most crucial for 7-Eleven is the strategy of the company to grow and expand its presence in the US. As Stan Reynolds stated: “This move was made possible by 7-Eleven reinvesting the return from previous successful acquisitions to continue the company’s growth as the world’s largest convenience retailer” (CSD, 2015, para. 9). The CFO of the company said that locations and a high volume of sales of Tedeschi Food Shops Inc. in the areas of Boston, Massachusetts, and New Hampshire complemented the existing stores of 7-Eleven (CSD, 2015). The plan of extensive growth of 7-Eleven was one of the main drivers to obtain new stores in the portfolio.
The third reason that led to the acquisition was the desire of the Tedeschi family to sell their business. Journalists reported that there were talks for several months about the plan to sell Tedeschi Food Shops Inc. (“7-Eleven to take on Tedeschi,” 2015). Some people noted that selling the company and its stores to 7-Eleven was a promising and profitable deal for Tedeschi (Jenkins, 2018). Thus, the family was also ready to transfer its business to another company.
Overall, valid reasons led to the horizontal acquisition, when companies in the same industry that produce the same product or perform the same steps of production decide to merge, or one company buys another. The reasoning of 7-Eleven Inc. suggests stating that the acquisition was aimed to extend the market. Namely, a market extension was performed to obtain additional channels for the sale of products, such as supermarkets, in complementary geographical areas that were not previously served by the company.
Process of the Acquisition
The process of any acquisition requires substantial efforts from both companies. It was announced that Tedeschi Food Shop Inc. would join 7-Eleven’s company that was managing around 10 thousand shops in North America, not to mention other stores worldwide (Lofstock, 2015). During the discussions, the CEO of Tedeschi Food Shop Inc. Peter Tedeschi stated that it is of crucial importance to ensure that the majority of retailers’ employees will retain their jobs. He said: “It was a repetitive theme throughout negotiations and 7-Eleven, as you would expect, was very receptive to keeping our hard-working employees” (Lofstock, 2015, para. 9). From the side of 7-Eleven, the representative of the company, Margaret Chabris, stated that the transfer of Tedeschi Food Shop Inc. under the 7-Eleven brand would be gradual (Berger, 2015). 7-Eleven was aimed to research the business of the retailer to understand which service programs and branded products are the most valuable for customers to incorporate them in the strategy of expansion, reporters suggested (Berger, 2015). Overall, the horizontal acquisition was favorable for Tedeschi Food Shop Inc. as well as for 7-Eleven.
The financial part of the acquisition, however, was not discussed publicly. Both companies refused to announce the purchase price, commercial terms, and other details of the deal. It was unclear whether 7-Eleven would retain the brand of Tedeschi, or all convenience stores would be rebranded as this strategy was utilized by 7-Eleven before with numerous other stores, according to data (Taryn, 2015). Matrix Capital Markets Group investment banking company was helping Tedeschi Food Shops Inc., providing valuation advisory services, negotiation suggestions, and supporting the organization’s sale process, announcing the results of the acquisition (“Matrix announces the successful sale,” 2015). The practice to refer to consulting firms during M&As is common and crucial for the success of a deal.
Margaret Chabris claimed that 7-Eleven would evaluate the financial performance of each Tedeschi, the stores’ fit into the strategy of the new company, and its location to decide about the closure of the store (Taryn, 2015). The acquisition was smooth as both parties intended to cooperate. 7-Eleven agreed to keep as many convenience stores of Tedeschi Food Shops Inc. as possible, while owners of Tedeschi Food Shops Inc. made it sure to keep employees and stop working after the acquisition.
The immediate results of the acquisition were announced in August 2015. 7-Eleven declared the purchase of 180 convenience stores of Tedeschi Food Shops Inc (Harris, 2015). These stores complemented the existing 7-Eleven supermarkets in the areas of New Hampshire, Greater Boston, and Massachusetts. 7-Eleven made job offers to all employees of Tedeschi Food Shops, including management teams of the company. 7-Eleven’s CFO Stan Reynolds said that the acquisition of Tedeschi Shops helped 7-Eleven to sustain customer loyalty, expand market presence, focus on efficient work with neighboring communities and franchisees that have unique services (Harris, 2015). Therefore, it can be stated that 7-Eleven chose the right company to acquire.
Later, the consequences of the acquisition have slightly changed as a result of the restructuring. In 2016, 7-Eleven decided to sell 13 stores of Tedeschi company, 12 shops in Massachusetts, and 1 in New Hampshire, according to news (“7-Eleven Trimming,” 2016). The decision was motivated by the lack of fit between these stores and those supermarkets that were supported and developed by the 7-Eleven’s business model, such as Tedeschi stores with fuel filling services. Finally, in 2017 Tedeschi Food stores were moved under the 7-Eleven brand and ended their media activities.
To conclude, one might say that the process of acquisition can affect the future business of a company in different ways, both giving advantages and reducing the results of potential activities. The analysis of the purchase of Tedeschi Food Shops Inc. by 7-Eleven Inc. showed that the sale was smooth due to several reasons. Both companies had similar business models and services that allowed them to agree on terms easier and transfer the assets faster. The decision of 7-Eleven to transform Tedeschi convenience stores gradually made it possible to retain customers and to help them adjust seamlessly to the new brand. Finally, two organizations were aimed to negotiate how the business will be supported after the acquisition in the most efficient way, which led to the successful growth of 7-Eleven in the US.
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