Coca-Cola & Costa Coffee Acquisition -
Memory Booster Notes
Acquisition vs Merger
**Visual Cue:**
Imagine Coca-Cola holding Costa like a puppet – full control. That’s an acquisition!
**Mnemonic:** 'S.O.S.' - Subsidiary, Ownership (100%), Single Decision Maker
In a merger, think of a handshake between equals – two logos merging into one.
4 Key Motivations for Coca-Cola's Acquisition
**Mnemonic:** G.R.A.S. - Growth, Reach, Access, Synergy
1. **Growth** – Coffee is booming; Coca-Cola wanted in.
2. **Reach** – Costa already global; Coca-Cola makes it bigger.
3. **Access** – New distribution and retail channels.
4. **Synergy** – Coca-Cola + Costa = more innovation.
Concerns & Problems
**Mnemonic:** O.L.D. C.A.P. - Overvaluation, Low margins, Differences, COVID, Alignment,
Performance
• Overpaid? Analysts think so.
• Low profit margins hurt Coca-Cola’s averages.
• Differences in business model: Retail vs Beverage.
• COVID shook Costa’s store-based model.
• Aligning US and UK cultures – tough.
• Performance risks due to unfamiliarity.
Value-Neutral Strategy
**Definition:** Strategy to maintain, not outshine.
**Mnemonic:** C.R.R.O.R - Compliance, Risk-aversion, Resource-limits, Operational Stability,
Rivalry Match
Unrelated Diversification
**Acronym:** D.I.G. - Diversify, Invest, Govern
• Diversify into totally different businesses
• Internal Capital Allocation (Invest smart)
• Governance improvement
Strategic Alliances
**Types:**
1. Joint Venture – New baby company
2. Equity Alliance – Shared ownership
3. Non-Equity – Just friends on paper
**Mnemonic for Reasons:** M.A.R.C.H. - Market Access, Accelerate, Reduce Costs,
Capabilities, Harmony
• Market Access via local partners
• Accelerate speed to market
• Reduce cost & risk
• Capabilities sharing
• Harmony = Competitive Edge
