HI6006 Assessment 2: Report on Aldi's Acquisitions and Structure

This report provides an executive summary of Aldi's acquisitions and structure within the Australian supermarket industry, focusing on mergers and acquisitions. It details Aldi's introduction, acquisitions structure, and specific examples like the purchase of Delhaize Group's Bottom Dollar Food Real Estate Sites and the merger with Kohl. The report outlines Aldi's strategies, including private labels and no-frills designs, and analyzes its functional and mechanistic structure. It covers the benefits of acquisitions, such as increased market share and enhanced business performance, while also addressing the importance of acquisitions in the context of the competitive marketplace. The report also touches upon Aldi's marketing mix and concludes with a summary of the key findings regarding Aldi's strategic approach to acquisitions and its impact on the company's growth and market position.

Running head: MANAGEMENT
Management
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Executive summary
The report proposed about the acqusitions and structure considering the retail
supermarket chain in Australia named Aldi. The other acqusitions structure included
acquiring the stocks, assets and mergers to form combined entities and at the same time,
facilitate the scopes for shareholders and investors to make investments and facilitated the
amount of cash provided for starting business in a new way with the merger and acqusitions.
From the report, it could be understood that the company acquired Delhaize Group's Bottom
Dollar Food Real Estate Sites and even merged with Kohl to enhance its business
performance and aimed at business expansion by opening up new stores all over the world.

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Table of Contents
Introduction of Aldi...............................................................................................................................3
Acquisitions structure............................................................................................................................4
Acquisitions of Aldi..............................................................................................................................4
Structures of the companies...................................................................................................................7
Aldi’s three strategies............................................................................................................................9
Marketing mix model for Aldi.............................................................................................................11
Disadvantages of acquisition...............................................................................................................12
Conclusion...........................................................................................................................................13

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Acquisitions and structure- Australian Supermarkets
Introduction of Aldi
The structure of Australian supermarkets is quite good and the
major supermarket chains are managed to ensure overall client satisfaction with the inclusion
of Aldi, Coles and Woolworths. The supermarket chains have often been found to merge with
small and medium sized businesses for ensuring international business expansion along with
creation of scopes for higher revenue generation with much ease and efficiency. Though
mergers and acquisitions, the supermarket chains have manage to survive in the competitive
marketplace as well as helped in managing business much more easily with the purpose of
expanding business and drawing more clients to increase the profit level achieved by the
organisation (Lin 2014). The acquisition and its structure by the supermarket chains has
facilitated the breaking down of the value of the business into both cash and non-cash
components including the earn outs, rolled equity, vendor take backs, etc.
Aldi is a common brand consisting of two German owned
discount supermarket chains that has opened up 10000 stores in more than 20 countries,
which has allowed the company to make a turnover of more than €50 billion. The German
operations include multiple regional companies, which has further resulted in creating a
sustainable position and spreading many stores all over the world further has generated
higher revenue. The business practices have helped in allowing the customers to make an exit
through the checkout point and even managed Apple Pay contactless payment system for
expanding the product selection and purchases made by the clients with ease and
effectiveness (Aldi.com.au 2019).

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Acquisitions structure
The major aspects that contribute to the structuring of merger
and acquisition are stock purchase, purchasing assets and mergers. The mergers and
acquisitions include acquisitions of assets such as plants, machineries. Physical inventories,
trademarks, patents, copyrights, etc. The purchasers gain the stocks of the company that is
targeted from the holders of stocks. The buyers need to negotiate about the warranty period
and representations considering the assets and liabilities while the purchase of assets include
managing the purchase agreement and make the structure of acquisition effective for the
buyers to purchase the assets (Arora, Belenzon and Rios 2014). The merger enables
combining entities to form a single combined entity and this allows the shareholders or
investors to gain significant amount of cash along with start of fresh entity too. The
acquisition structure not only benefits the company to gain tax benefits, but also allows for
managing asset transactions along with prevention of tax losses that can create issues for the
taxable income in the future (Bouraoui and Li 2014).
Acquisitions of Aldi
One of the major examples of Aldi acquisition include the purchase of Delhaize
Group's Bottom Dollar Food Real Estate Sites. The purchase of 66 real estate assets from the
Delhaize Group has further helped in acquiring various lands, Buildings and managed
leasehold improvements that are related to the Bottom Dollar Food operation. The retail chain
Aldi has offered god quality and fresh groceries and with the purchase of real estate
transactions, the groceries are produced of high quality and at reasonable prices to the regular
stores for fulfilling the needs and requirements of the clients with ease and effectiveness
(Aldi.com.au 2019). The accelerated growth plan has been further facilitated with the
purchase of the estates, which has further helped in opening up new stores along with

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introduction of many stores all across. With the acqusitions, there has been huge expansion,
which has further helped in opening stores coast to coast and anticipated more than 45
million clients every months (Antràs and Yeaple 2014). The expansion resulting from the
acqusitions has also allowed the company to create huge employment opportunities for
people as well as create good working conditions at the stores, warehouses and division
offices for ensuring that the employees can perform to their potential to serve the clients. It
has helped in persevering with the withdrawal of private equity partners and this has been one
of the effective ways to deal with the global financial crisis too. This has benefited the
shareholders or investors and the companies have managed to work together to form new
departments. The Australian Taxation Office made sure to manage capital gain tax and
created convenience for the shareholders or investors of Aldi Supermarket to work in
coordination with Delhaize Group (Arora et al. 2014). The acquisition structure has improved
with the sharing of transactions revolving around the management and purchase of business
entities and future liabilities, loans and other receivables too. The value assets attained could
help in enhancing the business performance, furthermore ensure speeding up the business
operations and processes along with accomplishment of the business goals and objectives
with much ease and efficiency (Cooper and Finkelstein 2014).
Not only Aldi has gained a good capital and increased
numbers of assets, but also there has been creation of better scopes and opportunities for the
businesses to reposition the brand portfolio and target a higher capital for utilising higher
growth prospects to succeed in terms of future earnings (Filipovic, Vrankic and Mihanovic
2014). It is essential as well for gaining strong rate of return on investments, good capital and
creating a sustainable position within the concerned industry too. By maintaining a strong
strategic stake in Delhaize Group, Aldi has created strong connections with other businesses
and people too, which has helped in the development of strategies along with determining the

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potential as a reputed and established loyalty organisation, furthermore obtain proper support
and investments of both these two companies (Elsas, Flannery and Garfinkel 2014).
The growth has accelerated at Aldi with the use of a unique
business model that has allowed the clients to find more convenience in making purchases of
grocery items because of the he amounts of costs that are saved. With the acqusitions of the
Group, the company has also managed to increase the geographic footprint, which has
allowed the company to introduce new products and services along with the continuous
supply of healthy food items and on-trend options like fresh produces for the customers
(Chapman et al. 2013). It is also important to ensure that informal clearance about the
acquisition is managed for ensuring that both the businesses understand the feasibility of
acquisition and check whether it could benefit them to survive in the competitive business
environment or not. After looking closely at the acquisitions of independent supermarket
chains, it has been found that the section number 50 prevents acquisition that can reduce the
level of competition within the marketplace (Ferreira et al. 2014). Thus, forecasting and
analysis of feasibility of acquisition is being done to determine the significance of acquiring
Delhaize Group's Bottom Dollar Food Real Estate Sites along with the identification of
effects regarding choices made by consumers and competitive constraints on the other
supermarket chains in Australia (Howson 2017).
There is another example of Aldi merging with Kohl as a
signed deal for piloting the grocery test and at the same time, open up new stores to drive the
traffic level. As people are concerned with the purchase of grocery items on a consistent
manner, there has been approaches undertaken to draw in more clients and enhance the
lifetime order value, because of which an effective model has been implemented by Aldi with
Kohl as a partner for attracting a huge customer base with lesser chances of risks associated

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with it (Cooper and Finkelstein 2014). Aldi’s pilot launch has further resulted in hybrid
partnerships including the fitness centres and health clubs, which can be beneficial too for
generating more sales and attract investors or shareholders to make investments on the
company for higher revenue generation. The ACCC wanted proper agreement from Aldi and
Kohl related to the acquisition for providing information though with the limitations in
acceptance of protocol. This would help in managing continuation of existing practices of
enabling improvements in acquisitions outside the protocol too (Antràs and Yeaple 2014).
Aldi supermarket chain has merged with Kohl and also
acquired Delhaize Group by working with Standard bank that acted as a financial and debt
advisor along with managed the roles and responsibilities of transactional sponsorship and
providers of lead debt. It has been one of the largest outbound acquisitions that created a
great deal and at the same time, facilitate the shareholders or investors’ base to ensure proper
funding, debt and equity management. The merger and acqusitions has been aimed to
enhance the growth of the company by opening multiple distribution channels to serve people
conveniently (Lebedev et al. 2015). Due to this, there has been increase in the offerings of
grocery items along with clothing, footwear and textile items too. This also helped in
incorporating more grocery products in the stores along with more clothing and textile
products, which catered the needs and preferences of people with ease and efficiency. Not
only the market share has increased for Aldi supermarket after the acquisition, but also there
has been increased numbers of stores (Erhemjamts et al. 2013).
Structures of the company
The structure of Aldi shows that more focus has been given
on functional and mechanistic aspects, which has helped in offering products and services at
a much lower price when compared to its competitors such as Walmart, Trader Joe, etc. The

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main strategies include using private labels, which allows for avoiding the middle man or
third party and thus the savings are passed on to the clients, which ensures increased sales
volume and discounts on products and services too (Edwards, Kravet and Wilson 2014). The
no-frills design along with environment friendly lighting and clean energy usage has reduced
the costs of utility and operations too.
Aldi supermarket chain’s management structure is effective
considering the fact that most of the stakeholders have been taken into consideration to
ensure smooth business functioning. With the management of a new structure of the
organisation, the company has managed to target supply chains and gained the trust and
loyalty of clients, which further helped in creating new scopes and opportunities for driving
earnings and at the same time, target the diverse market segments to fulfil needs of many.
The effective organisational and management structures further assisted the company to save

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operational costs and utilise the big data and information for improving the online shopping
experience and drive customers’ loyalty (Zaheer, Castañer and Souder 2013).
Aldi’s three strategies
One of the major and recent business strategies is the
upgrades of many stores, which has been possible with the help of $1.6 billion investment to
re-model the 1,300 US stores by the end of the year 2020. The changes are managed with the
help of introducing open ceilings, natural lighting systems’ addition, LED fixtures, utilisation
of energy saving refrigeration and using environment friendly building materials for ensuring
the reduction of operational costs along with staying ahead of the competitors in business.
With its huge numbers of stores all over the world, the smaller size stores can also reduce the
costs of overhead and at the same time, reduce the effects of global warming along with
maintenance of energy efficient procedures (Filipovic, Vrankic and Mihanovic 2014). The
use of solar panels in the roofs has further allowed to implement a remodelling program and
thus the company has made investments of $3.4 billion to expand its stores, furthermore
created scopes for mergers and acqusitions to benefit within the marketplace.
Being the food retail industry a highly competitive industry,
the organisations need to provide the customers value for money and thus high quality
products need to be offered at reasonable prices for catering to the needs and preferences of
the clients. The competitive pricing strategy has been implemented by Aldi by comparing the
prices of different other retail chains and then implement the right pricing strategy for
reducing the quality of products though without making any compromise to the quality of
products and services (Howson 2017). The lean production strategy has further helped in
getting more from less, which has reduced the quantity of resources used or the production of
good quality products and services. The learn production strategy has also eliminated the

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wastes and used lesser labour, space, materials and time for ensuring continuous
improvement, timely production, time based management of human resources and managing
proper quality of products to make people understand their roles and responsibilities properly
while working after acqusitions (Lebedev et al. 2015).
The three major values of the organisation are simplicity,
consistency and responsibility and thus becoming socially responsible is an integral part of
any businesses. The sustainability strategy is implemented by Aldi to become socially
responsible by caring about people, community and individuals roles as a business aimed
towards the formation of a better world. To maintain high level professionalism and integrity,
Aldi has implemented corporate social responsibility principles that are needed to be
followed by the employees to committing towards something good to the environment,
furthermore define the minimum social standards that are applied to the business partners and
suppliers all through the supply chains of the organisation.
The sustainability and competitive strategies, either of these
two, can be the most suitable, because it can help Aldi to survive in the competitive business
environment by reducing operational cost and even ensure become responsible towards the
community for creating positive mind-sets among clients.
The acqusitions have not only allowed the business to manage
proper corporate governance and ensure that the laws, rules, regulations and guidelines are
followed properly to meet up business standards. This also favoured the cultural shift of focus
from the main office processes to the financial results and business’ operational outcomes too
(Zaheer, Castañer and Souder 2013). The support functions were facilitated, which further
ensure divisional success along with creation of more scopes and opportunities to reduce the
overhead costs and other costs incurred for the various business operations and processes’

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management. The acqusitions and structure further brought immense improvements for Aldi
such as necessary changes in the working capital positively, thus helping to centrally manage
the range and reduction of SKU along with auto-replenishment and effectively using the
promotional approaches and adver6isments’ management too (Chapman et al. 2013). It has
created value creation opportunities for Aldi such as maximisation of shareholders; value
along with the improvement of trade related performance of the existing businesses too. The
synergies include leveraging the global sourcing activities and improvement in supplier
arrangements, which has further facilitated the use of brand related aspects and maintained a
positive brand image and name too.
Marketing mix model for Aldi
Product
 The products are offered at
affordable prices without
compromising on its quality
 The sourcing of products from
selected suppliers and own branding
have created greater control over the
processes of production and pricing
 The other product range includes
fresh fruits, vegetables, health and
beauty item, electronic products,
household goods, etc.
 Aldi Talk and Aldi Mobile are the
mobile network operators too
Price
 The unit pricing strategy at the
grocery stores has helped the
customers to compare between the
prices if products of Aldi and other
supermarket chains
 The low prices are charged to create
market penetration and gain higher
market share
 The competitive pricing strategy has
allowed Aldi to keep prices low and
create positive mind sets among
clients (Aldi.com.au 2019)

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available
Place
 More than 8000 stores in 18
countries and new stores are being
introduced in Britain every week
 The products are procured from
suppliers and stores ate he local
warehouses
 The online presence has created ease
for customers to check the product
details and locate the nearest stores
too
Promotion
 Investments in promotional activities
have allowed for greater brand
exposure
 The interaction with clients via
direct mail and newspapers is useful
too
 The use of email marketing has
further helped in developing trust
among the clients
Disadvantages of acquisition
Acquiring a similar kind of company within the similar kind
of sector, i.e., the retail supermarket industry often creates risks of becoming redundant. One
of the major disadvantages is that when the two businesses have similar kinds of geographical
spheres and the target audiences are also same, then it might get difficult to compete against
the second business that has been acquired. The difference in culture, values and beliefs
further could contribute to the clash and misunderstanding of the existing business and at the
same time, create risks associated with the retention of staffs that the business has aimed to

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acquire (Lin 2014). This would also result in increase of debt load, furthermore affect the
business expansion in the future as well.
Though there are tax benefits, good economies of scale and
gaining better control over the market considered as major benefits, still there are few areas
where acquisitions might bring undesirable results such as the loss of staffs who are skilled
and knowledgeable, internal competition within the workplace, increase in operational costs
along with uncertainty considering the approval of merger or acquisition through
management of proper assurances.
Conclusion
Based on the report, it could be understood that the acquisitions and structure of the
supermarket chains in Australia had been focused on. The structure of acquisition enabled
management of stocks, inventories and at the same time, managing negotiations related to the
warranty period and making purchase agreements too. The major acquisitions were done by
Wesfarmers to merge with Coles while Woolworths’ acquisition of David Jones also brought
major transformation to the business for sustaining in the competitive marketplace. In spite of
the advantages, there were few disadvantages such as redundancy and higher costs of
operations, which might affect the business functioning and thus focus should be upon it to
ensure smooth business functioning.
References
Aldi.com.au. (2019). ALDI Supermarkets - Good Different - ALDI Australia. [online]
Available at: https://www.aldi.com.au/ [Accessed 28 Jan. 2019].

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Antràs, P. and Yeaple, S.R., 2014. Multinational firms and the structure of international trade.
In Handbook of international economics (Vol. 4, pp. 55-130). Elsevier.
Arora, A., Belenzon, S. and Rios, L.A., 2014. Make, buy, organize: The interplay between
research, external knowledge, and firm structure. Strategic Management Journal, 35(3),
pp.317-337.
Bouraoui, T. and Li, T., 2014. The Impact of Adjustment in Capital Structure in Mergers &
Acquisitions on US Acquirers' Business Performance. Journal of Applied Business Research,
30(1), p.27.
Chapman, K., Innes-Hughes, C., Goldsbury, D., Kelly, B., Bauman, A. and Allman-Farinelli,
M., 2013. A comparison of the cost of generic and branded food products in Australian
supermarkets. Public health nutrition, 16(5), pp.894-900.
Cooper, C.L. and Finkelstein, S. eds., 2014. Advances in mergers and acquisitions. Emerald
Group Publishing.
Edwards, A., Kravet, T. and Wilson, R., 2016. Trapped cash and the profitability of foreign
acquisitions. Contemporary Accounting Research, 33(1), pp.44-77.
Elsas, R., Flannery, M.J. and Garfinkel, J.A., 2014. Financing major investments:
Information about capital structure decisions. Review of Finance, 18(4), pp.1341-1386.
Erhemjamts, O., Li, Q. and Venkateswaran, A., 2013. Corporate social responsibility and its
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Ferreira, M.P., Santos, J.C., de Almeida, M.I.R. and Reis, N.R., 2014. Mergers & acquisitions
research: A bibliometric study of top strategy and international business journals, 1980–2010.
Journal of Business Research, 67(12), pp.2550-2558.

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Filipovic, D., Vrankic, I. and Mihanovic, D., 2014. Theoretical overview of microeconomic
aspects of mergers and acquisitions. Journal of economic and social developmen, 1(2), pp.0-
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Howson, P., 2017. Due diligence: The critical stage in mergers and acquisitions. Routledge.
Lebedev, S., Peng, M.W., Xie, E. and Stevens, C.E., 2015. Mergers and acquisitions in and
out of emerging economies. Journal of World Business, 50(4), pp.651-662.
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congruence theory and task interdependence. Journal of Management, 40(7), pp.1831-1856.
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integration in acquisitions. Journal of Management, 39(3), pp.604-632.

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