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Hard Shareholder Value Activist Investor Strategic Decision Merger & Acquisition

Activist Action

#Consumer Goods
ProHub Comment

This case tests candidates' ability to balance competing objectives between activist investors (seeking short-term stock appreciation) and company management (seeking long-term sustainable growth). The case requires both quantitative financial analysis (NPV calculations, valuation multiples) and qualitative strategic reasoning about which divestitures and operational changes are realistic and sustainable.

Estimated Time 36 minutes
Difficulty Hard
Source Duke
20 / 100
Your client is a large CPG company with multiple business units including snacks, beauty, and home (cleaning) products. Your client is under pressure from a high-profile activist investor that has built a 7% stake in the company. The client has asked you to help predict the new investors likely demands that could increase stock price or company performance. What are your ideas to deliver short-term and long-term value back to the shareholder?

Clarifying Information

  1. Large business in North America. The client operates in ~70 countries.
  2. Revenue: Snacks $19B, Beauty $31B, Home $29B; EBITDA: $24B - Target Savings: $10B
  3. This investor likely has influence on the board and cannot be ignored.
Mock Interview
Interviewer

Your client is a large CPG company with multiple business units including snacks, beauty, and home (cleaning) products. Your client is under pressure from a high-profile activist investor that has built a 7% stake in the company. The client has asked you to help predict the new investors likely demands that could increase stock price or company performance. What are your ideas to deliver short-term and long-term value back to the shareholder?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

A large multi-business CPG company faces pressure from a 7% activist investor stake holder. Candidates must evaluate strategic options (supply chain restructuring, low-cost sourcing, business unit divestitures) to deliver $10B in shareholder value while maintaining long-term operational viability. The optimal solution involves divesting the low-growth Silky Sweets brand (~$10.8B in value) to meet activist targets without compromising core business operations.

Key Insights:

  1. Activist investors typically target 1-2 year time horizons, so long-term initiatives (e.g., supply chain restructuring with 5+ year payouts) are insufficient to meet their demands
  2. Short-term value creation through asset sales/divestitures is more appealing to activist investors than operational efficiency improvements, even if operationally less disruptive
  3. Candidate must recognize which business units are non-core or underperforming (low growth, lower margins) versus which are strategically important and require retention
  4. Low-cost sourcing and outsourcing options in CPG snacks are generally not viable due to shipping inefficiencies, brand trust concerns, and the need to service major retail customers in developed markets
  5. Valuation multiples (EV/EBITDA) are critical tools for estimating divestiture proceeds; candidates should use comparables and apply appropriate multiples to each business based on growth and profitability profiles