And while Unilever took out one of its competitors, it expanded its customer base and store locations as well, a fairly common reason big businesses buy smaller ones, says Garson.
Many consumers insist on only buying local and supporting small businesses, but takeovers and partnerships with larger companies aren’t always bad for consumers, since access to brands often gets easier after a takeover.
Access to consumers can actually be a difficult hurdle for some small companies when the logistics of distribution and related costs come into play.
Before it teamed up with Coca Cola Enterprises (Stock Quote: KO) in 2007, Energy Brands, the maker of Vitaminwater, lacked a solid distribution network. At first, it was only available in New York, then gradually spread to Los Angeles, eventually landing in the big cities like Chicago, Seattle, Philadelphia and Detroit, according to BevNet, a beverage industry publication. The small, New York-based business was only able to sell its flavored and nutritionally-enhanced waters at nearly every grocery store and bodega thanks to Coke’s $4.1 billion acquisition of the company.
Another example is Honest Tea, which could only be found in natural food stores before the company sold a 40% stake, worth $43 million, to Coke in 2008. Now the bottled teas are available at mainstream stores like Stop & Shop and 7-Eleven.
Similarly in 2006, Winebow, a small wine distributor, bought the Boston Wine Company expressly to expand its distribution into Massachusetts.
In the technology world, smaller companies are often acquired simply because a rich company wants their patents.