FOREIGN DIRECT INVESTMENT CASE STUDY 1

UNILEVER & ALBERTO CULVER: FDI CASE STUDY

The Archetypal Model: Unilever and a Major Global Acquisition

Kyron Richard

University of Southern California
FOREIGN DIRECT INVESTMENT CASE STUDY 2
The Archetypal Model: Unilever and a Major Global Acquisition

Though the Anglo-Dutch conglomerate, Unilever, it is most recognized for its significant
market share of the food and consumer industry, it had a stake in the personal care industry
before 2010 with market leaders like Dove and Suave. However, it made attempts to it expand
into this, more profitable, industry through the acquisition of an American company Alberto
Culver. Culver had strong standing in the United States, and promising for other emerging
markets in Latin America, which holds high hopes for Unilever, (Sonne & Byron, 2010). Martin
Deboo, an analyst with Investec Securities, highlighted a major impact the Culver acquisition
could have on Unilevers business, Personal care brands are easier to globalize than food brands
because consumers tend to have the same needs in common. But food is quite different, in that
culinary tastes differ from region to region (Bawden, 2010). This information is particularly
important for a company that sells products in 170 countries, and the profitability possibilities
are virtually endless.
Unfortunately for executives at Unilever, some of their stakeholders were not excited
about the opportunity, or found it too lucrative. The four central stakeholders in this case include
governmental regulation entities, Alberto Culvers employees, Alberto Culvers shareholders and
Unilevers own shareholders. The former is important because governments take extreme caution
to conglomerates which have what they deem to be too significant market shares in certain
industreis, which endangers fair pricing. Culvers employees and shareholders not only
determine the value of the company but also how productive it is. If the react negatively it could
endanger the acquisition, or have an impact on the final group, Unilevers shareholders who may
FOREIGN DIRECT INVESTMENT CASE STUDY 3
not approve of the deal or might feel threatened at a negative reaction from Culvers staff and
investors.
Government officials recognized the possibility for Unilever to have a significant
monopoly on the hair product market, and the Antitrust Division of the Department of Justice
filed a lawsuit in May 2011, seven months after the companies had agreed to a selling price of
around 3.7 billion. According to the Department of Justice, the sale would have a negative
impact for, In the case of value shampoo and conditioner it would reduce the number of
significant competitors in the value shampoo and conditioner markets from three to two, leaving
Unilever with approximately 90 percent of those markets (Justice, 2011). This loss of
competition is of great importance to governmental regulators who want to maintain a
competitive market landscape and ensure fair pricing for consumers.
Though there were initial complications with the acquisition, the parties soon reached a
compromise and, Under the terms of the agreement with the US DOJ, Unilever will divest the
Alberto VO5 brand in the United States from the Alberto Culver portfolio and the Rave brand
from its own portfolio (Financial, 2011). There was still another hurdle to be jumped over. One
other important stakeholder that Unilever failed to receive support from was the employees of
Alberto Culver. A statement was made by Dan Stone, the Vice President of corporate
communications for Alberto Culver who said in 2010, his team is not working closely with
Unilever, since the company is still a competitor until the [deal closes] (Bruell, 2010). This
attitude is important for Unliever, since integration of the brands is important to the acquisition.
The Unilever case is an archetypal model for the various barriers to investment for companies.
FOREIGN DIRECT INVESTMENT CASE STUDY 4
Works Cited
Bawden, T. (2010, Sep 28). Unilever spends pounds 2.3bn to acquire US toiletries firm: Alberto
culver deal brings high-margin hair products anglo-dutch firm will aim to cut costs by
$160m. The Guardian. Retrieved from http://search.proquest.com/docview/755253594?
accountid=14749

Bruell, A. (2010, 11). Alberto culver comms not yet under unilever. PRweek, 13, 7. Retrieved
from http://search.proquest.com/docview/864730294?accountid=14749

Financial markets; unilever receives approval to acquire alberto culver. (2011). Economics &
Business Week, , 151. Retrieved from http://search.proquest.com/docview/867394979?
accountid=14749

Justice department requires divestitures in unilever's acquisition of alberto-culver company.
(2011, May 06). Targeted News Service. Retrieved from http://search.proquest.com/
docview/865065839?accountid=14749

Sonne, P., & Byron, A. (2010, Sept 28). Unilever primps for the hair aisle: Proposed alberto
culver acquisition would set up challenge to p&g, l'oral. The Wall Street Journal.
Retrieved from http://online.wsj.com/news/articles/
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