Question

You have just been hired as a financial analyst for The Kroger Co. (KR). Your boss has asked you to work on the project for The Kroger Co. (KR) to acquire Sprouts Farmers Market, Inc. (SFM). Upper management believes that this company would be a good complement to Kroger’s current operations. Discuss concepts that would help you determine whether or not Sprouts Farmers Market, Inc. (SFM) should be acquired by The Kroger Co. (KR). Make sure to discuss all aspects including the analysis for determining an acquisition price. No calculations are necessary.

Answer 1

Answer :

The factors that effect whether The Kroger Co (KR) should acquire Sprouts Farmers Market Inc are -

1. Strategic Fit - First we should see that the Sprouts Farmers Market Inc is strategic fit or not.
2. Cultural alignment - For the acquisition to work there should be a proper cultural alignment in the organizations. Therefore, proper time should be given to get the best of both the cultures.
3. Team Integration - As acqisition forces people from both the companies to work together therefore proper productive working relationships should be developed.
4. Operational Integration - There should be proper integration of major processes, IT platforms and reporting procedures in order to acqusition to work

Factors that help in determining acqusition price are -

1. Future performance
2. Financial Performance
3. Cash flows, not profit
4. Financial return expectation