The acquisition of Hotel Chocolat and what drives deal value

Published in Insights by Emma Curtis on 21 November 2023

Hotel Chocolat acquired by Mars Corporation

M&A news is currently dominated by the sale of Hotel Chocolat to Mars Corporation, in part due to the price tag – £534m, which is roughly double what the company’s share price suggested it was worth. Many articles are focusing on the opportunities this brings to Hotel Chocolat, but what about the opportunities Hotel Chocolat brings to Mars? What makes a company pay top price for an acquisition?

What drives maximum value?

Our model at Kingsbrook focuses on obtaining maximum value for our clients’ businesses, and our experience has seen this realised through several avenues. Here is a selection of the ones we see most often:

1. Access to a prestigious or difficult to enter client base. Do you work with prestigious clients, or clients that are difficult to win? Perhaps your sector requires you sit on frameworks or preferred supplier lists. Buying a company with these relationships already in place is a faster and more efficient way to gain these relationships.

2. Access to a premium brand – your luxury/premium brand can offer a company wanting to enter your sector immediate cachet. The acquirer will be able to transition much more easily with an already established brand, rather than reposition their current brand, which could take years.

3. Access to systems and services that would otherwise take years and heavy investment to develop separately

4. Competition – overall, competition (or the perception of it), will drive the value of your business. If you can create a bidding war between two or more companies, then the acquirer’s mindset will change from ‘how little can I pay’ to ‘what do I need to offer to win?’

In the case of the Mars acquisition, the company is gaining a luxury/premium brand with a reputation for quality. A brand that is still popular despite the cost of living crisis. This acquisition opens the luxury market up to Mars – a whole new sector, which can be grown internationally with Mars’ additional resources behind it. Mars spokespeople have also mentioned Hotel Chocolat’s network of own-brand stores, and its impressive online sales system, both of which offer Mars new routes to market. It seems that the synergies of these companies, both family owned and run, will provide substantial growth opportunities going forwards.

 

If you are thinking of selling your business and would like to explore your options with Kingsbrook, please get in touch, either by email at [email protected] or call us at 01635 736741.

Published on 21 November 2023 by

Emma Curtis

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