A large CPG company faces pressure from a 7% activist investor stakeholder. The candidate must recommend strategies to create $10B in shareholder value while maintaining long-term competitiveness across three business units (snacks, beauty, home). The optimal solution involves divesting the Silky Sweets brand while rejecting pure cost-cutting measures that would harm long-term operations.
Key Insights:
- Activist investors typically focus on 1-2 year time horizons, requiring immediate cash returns (stock buybacks, dividends, or proceeds from divestitures)
- Short-term cost reduction strategies like outsourcing manufacturing or moving R&D to low-cost countries can damage long-term brand value and operational efficiency
- Divesting non-core, low-growth businesses is often the optimal approach as it satisfies activist demands without compromising core operations
- Valuation multiples (EV/EBITDA) are critical for assessing divestiture values; Silky Sweets at 3.5x EBITDA multiple yields ~$10.8B, meeting activist targets
- Candidates must think from both investor AND company perspectives, recognizing inherent tensions between short-term returns and long-term strategy