You’ve probably heard that strategic buyers pay more for a business if synergies exist to save them money or add long-term value to their current products, services or brand. This is true with the lower middle market, private companies we work with, and it’s also true in the public world of M&A. Here’s the buzz on one surprising example – Burt’s Bees:
Burt’s Bees, a billion-dollar manufacturer of natural skincare products, was founded by a unique pair in 1984. It began when Burt Shavitz, an avid beekeeper with a simple life, picked up 33-year-old hitchhiker and single mom, Roxanne Quimby, in Delaware. Quimby, grateful to Shavitz for the ride, offered to help him tend the beehives behind his small cabin in Maine. The two soon started creating beeswax candles together, selling them at local markets, and expanding into other products as demand increased. By 2000, Burt’s was generating over $20M in revenue, a figure that grew to $164M in 2007 when Clorox acquired Burt’s Bees for $913M.
So, why did the acquisition of a company known for its naturally-made products make sense for Clorox, a chemical cleaning company? At the time of acquisition, Clorox was pushing green initiatives. They focused on practices centered around environmental sustainability and listened to customers increasing concerns about health and wellness.
Clorox, although initially criticized for this purchase, proved the doubters wrong. Five years after the acquisition, they made sustainability improvements to 35% of the products in their portfolio translating into $15M of annual cost savings. Surprisingly, Burt’s products have become more natural thanks to the extensive R&D department at Clorox (97% pre-acquisition vs 99% natural post-acquisition). Clorox also implemented a Burt’s Bees practice, the “Dumpster Dive,” where employees sift through trash to determine key waste-generating locations at their facilities. Then install recycling bins at these locations to filter waste on the front end. Clorox facilities attempting the “Dumpster Dive” experienced a 50% reduction in waste sent to landfills. By 2020, the company plans to operate a dozen (or more) production plants with zero waste to landfills. These are some of the many steps Clorox is making on its journey towards a greener future.
For Quimby, who bought out Shavitz in 1999, the transaction allowed her to act on her passion for land conservation. She purchased 120,000 acres of Maine forest, with efforts to turn this land into State and National Parks. She has donated over $60 million worth of property and $20 million for maintenance to the US Department of Interior, while preserving 100 acres as her own conservation parcel.
Both the buyer and the seller accomplished different, significant goals because of the transaction. Big or small, well-executed transactions should create positive synergies for all parties involved.