Farmer Brothers' Acquisition of Boyd Coffee: An M&A Analysis

This report provides a detailed analysis of the merger and acquisition (M&A) deal between Farmer Brothers and Boyd Coffee Company. The report examines the length of the discussions, the rationale behind the acquisition, and the absence of other bidders. It explores defensive measures employed, the impact of the acquisition on the buyer, and the initial financial impact, including changes in debt/capital ratio and EPS. The analysis covers post-merger performance, including the impact on the economy and industry, as well as the buyer's performance, financial health, organizational structure, market position, and reputation. The report highlights key aspects such as the duration of the deal, the financial terms, and the strategic goals of the acquisition, providing insights into the implications for both companies and the coffee industry. The report also discusses the impacts on financial statements of the acquiring company, changes in stock values, and the overall performance of Farmer Brothers following the acquisition. Furthermore, the report discusses the impact on the economy, consumer prices, and competition within the coffee industry.

Mergers and Acquisitions
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Mergers and Acquisitions
Length of discussions between buyer and seller
Noteworthy, Farmer Brothers Company made a decision to acquire the Boyd Coffee
Company on August 22 2017 with an aim of boosting its production efficiency, expand operation
and strengthen its position in the market and boost its synergies among other benefits (Farmers
Bros Inc.).Individually, both Farmers Brothers and Boyd Coffee company, before the merger
where successful and reputable companies. However, the need to boost its market presence drove
Farmer Brothers to consider the acquisition with Boyd s Coffee Company based in Portland (CT
Press). Notably, Boyd Coffee Company was a privately owned enterprise prior to the merger
whereas the Farmers Bros Company was a public company before the acquisition exercise. The
announcement to acquire the Boyd’s Coffee company asset was made in August and the
agreement entered into in October 2017 (CT Press) .The duration taken in the merger and
acquisition process was approximately three months. Specifically, in October 2017, the merger
and acquisition deal between Farmers Bros and Boyd Coffee Company was concluded (Globe
Newswire). Specifically, Farmer Brothers Company acquired the Boyd s coffee at $58.5 Million
inclusive of preferred stock shares (Stevens)

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Describe other bidders (if any).
During my research on possible investors for the Boyd’s Acquisition deal, there was
only talk of the Farmer Brothers company as the only interested party thus there was no research
on other possible bidders for the merger and acquisition investment deal.
Defensive measures employed by seller either before or after the deal announcement
Typically, buyers and sellers undertake to cushion themselves against loss and fraud and
seek to protect themselves against loss. Such can be said for Farmers Brothers and the Boyd
Coffee Company. For purposes of providing legality and authority for their transaction, Boyd
Coffee company contracted the services of a law firm to work out the details of the acquisition
agreement so as to protect its interests .Equally, the parties opted for a written agreement which
was signed by representatives of the both Farmer Brothers coffee company and Boyd Coffee
company (Law Insider).Usually, written and signed documents are considered authoritative and
legally binding which makes it easier for both contracting parties to enforce their rights under the
agreement. Both contracting parties had their acquisition intentions made public which provides
public record and in another way makes the acquiring firm more valuable and raises it reputation
in the market.
Impact of Acquisition on Buyer
Owing to its acquisition of the Boyd Coffee Company. Farmers Brothers coffee company has
expanded its operations and distribution capacities to Initial impact of deal on buyer’s financial
statements (e.g., changes in debt/capital ratio; EPS accretion or dilution). According to the
merger and acquisition deal proposed ,Farmers Brothers were to purchase the Boyd coffee
company at $42m and also acquire 21000 worth of preferred stock .Essentially, this means

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Farmers Bros had to part with the above sums of money and shares from its assets to acquire the
Portland based company (Boyd).The Boyd coffee company acquisition is meant to increase and
strengthen the presence of the farmers Brothers coffee company in the region and to expand its
distribution network.it can be said for sure that the acquisition of the Boyd company has
extended the Farmers Brothers company presence in Portland (Farmer Bros) .
Through this acquisition, the Farmer Brother coffee distribution outlets and facilities have
grown which can be said to have greatly contributed to the growth of the company .The
penetration of new market, Portland has been achieved through the successful execution of the
merger and acquisition contract made between the Boyd s Coffee Company and Farmers
Brothers Coffee Company. Following the merger and acquisition announcement by Farmer
Brothers of Boyd Coffee, there was a slight increase in the stock values. Usually, the
announcement of mergers has this kind of effect on stocks belonging to the acquiring companies
(Investopedia).The same can be said for the stock value of Farmer Brothers which shot up by 7%
following the acquisition deal announcement to the press. In a way, such public announcement
make the companies seem valuable, profitable .Further the reputation of the Farmer Brothers was
boosted by the acquisition announcement.
Before the merger and acquisition of the Boyd company, Farmers Brothers company
volume of green coffee has increased by 0.9 percent as at the fourth quarter of the year
2017(Global News wire). Equally, there is a substantial increase in the gross production margin
by 40 percent. In addition, Farmers Bros has incurred decreased income and operations by a
figure of $1.4m. Further, there’s been a decrease in the net income of the Farmers Bros Company
to $1.1. Specifically, the net sales for the Farmer Bros company has increased significantly
following the merger. Currently, the net sales stood at $131,713,000 which was an increase of

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$225000 from the previous quarter (Bloomberg). In addition, the Farmers Brothers company s
was $1 258000 which was a reduction from $2 505000 from the previous year. This goes to
show that the merger and acquisition agreement is working in favor of Farmer Brothers coffee
company (Bloomberg).
Moreover, taxation losses decreased from $2 701000 to $ 1 688000 from the previous
year thus the assertion that the acquisition of Boyd Coffee company was good for the Farmers
Brothers. Equally, net loss reduced significantly as contrasted against the year 2016
(Bloomberg).There was a remarkable net loss reduction by $640000 from the year 2016 which
means the company made more profits than losses following the successful merger with Boyd
Coffee Company (Bloomberg). In a way, this shows that mergers and acquisitions can be very
effective in achieving company goals. As per the acquisition agreement between Farmer
Brothers and Boyd s Coffee, the company was to establish its presence in the region, expand its
operations and synergies to which the same is to be accomplished under the implementation of
the acquisition deal. Through acquisition, a company is able to grow its operations through
acquiring assets of the other company.
Post-Merger Performance (From Closing to Now)
How did the economy and industry perform subsequent to the subject acquisition?
Partly, mergers can both be good or bad for the economy. Due to the expansion of
operations by acquiring firms, there is the likelihood of dominance of the market or industry
which in a way is not good for consumer welfare (Thoma). Due to the consolidation of the coffee
industry, there’s the likelihood of consumer prices going high due to the dominance created by
expanding firm thus undermining consumer welfare.Presently,it is projected that the United

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States Of America coffee market is going to increase significantly across the world due to the
various mergers undergone by the leading coffee provides such as the Farmer Brothers for the
year 2016-2020 (Transparency Research Markets).This goes to show that the actions of the
Farmer Brothers directly impacts on the coffee industry and economy of the United States of
America. In the long run, consolidation of companies directly impacts on the economy.
Through the Acquisition of the Boyd Coffee Company, there is increased green coffee
production owing to the increase in the production and processing capacities. In addition, the
Farmers Brothers have penetrated new markets in Portland through the acquisition which means
there will be increased revenue for them. Also for the economy, there will be employment
benefits following the acquisition to operate in the expanded market which will lead to increased
economic livelihoods, income and revenue for all the stakeholders .Undoubtedly, the
consolidation of the United states of America Coffee industry through mergers such as those
executed by the Farmer Brothers Coffee company has significantly boosted competition in the
industry (Research Market).Through consolidating the coffee industry, dominance of companies
might occur leading to high consumer prices which undermines consumer welfare thus the need
for government to regulate the mergers and acquisitions.
Usually, through mergers and acquisition, the coffee industry is likely to experience
growth (Diankantonis).Owing to the fact that through mergers and acquisition, it is easy for
companies to expand their operations thus creating more employment opportunities for
employment and investment. In addition, through mergers and acquisition of coffee enterprises,
the operation and distribution capacities of the coffee industry increases thus boosting the growth
of the coffee industry. For instance, following the merger and acquisition of the Boyd coffee
company by Farmers Brothers, its distribution outlets have substantially increased which means

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more revenue for the Farmers Brothers. Predominantly, mergers are good for business due to the
likelihood of increasing the profitability of business. However, the same cannot be said in
effecting efficiency (Bronigen and Pierce).
Notably, one of the reasons of the merger for Farmers Brothers with the Boyd coffee
company was to increase efficiency, the same is yet to be fully realized .In a way, mergers and
acquisitions are good for the economy in the sense that it maximizes profit margins which are
likely to lead to expansion of more businesses. However, the ability to maintain efficiency in
production and distribution of goods and services is not always easily achievable by most
mergers and acquisitions. For some companies, mergers and acquisitions are a way to promote
its efficiency. However the Implementation and success of achieving and maintaining efficiency
isn’t always achievable in most mergers and acquisitions arrangement in the world
(Transparency market Research). The efficiency of acquisitions is based on individual company
management and organizational structure thus the need for acquiring firms to set and adopt
efficiency achieving routines and operations to achieve all round operation efficiency.
Following the acquisition of the Boyd coffee company by Farmers Brothers, there has
been various operational and distribution changes. Also, the merger and acquisition process has
made various changes to its finances. Specifically, the Farmers Brothers has recorded decreased
volume of the sale and processed green coffee by 0. 4 percent. In addition, there was recorded a
$2.2m decrease in the gross profit as compared to the fourth quarter fiscal status of the company.
Moreover, there is a decrease in the gross margin to 37.2 percent as contrasted with the fourth
quarter report of the year 2017 (Farmers Bros) .in a way the results were not promising
considering the recent acquisition of the former Portland based company (Farmers
Bros).Similarly, there was a reduction in the adjusted EBITDA from the previous quarter of

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2017. However, it is projected that there will be increased production by 6m pounds toward the
fourth quarter of this year. In a way, it is expected that the merger will prove to be successful in
fulfilling the company reasons for the merger .Noteworthy, there has been a remarkable
customer service and increased efficiency in the year 2018 (Farmers Bros).
How did the buyer perform subsequent to the acquisition? (Include impact on firm’s
financial health, organization structure, market position and reputation.)
Notably, following the merger and acquisition of the Boyd coffee company. The farmers
Brothers Company has experienced various changes. As per the merger and acquisition
agreement, Farmer Bros goals were to expand its banking credit facility .Also, the buyer hoped
to increase its accretive earnings .Typically, mergers and acquisitions are a way to grow
company operations and create value and the same can be said for Farmers Brothers whose
acquisition agreement seeks to expand its operations (Stewans-Muller, et al.). Following the
conclusion of the merger and acquisition agreement, Farmers Brothers Company is in the process
of implementing these changes among others. There has been an expansion of operations
following the acquisition of Boyd facilities and operation thus it is safe to say there is increased
production and distribution of green coffee by farmers Brothers Company (Schouten).
Noteworthy the Farmers brothers have full ownership and access to the former Boyd s
operation facilities which is expected to aid in the expansion of its operations (Stewans-Muller,
et al.). In a way, this has strengthened the presence of the Farmers Brothers in Portland. In
addition, the stock values of the Farmer Bros company went up following the acquisition deal
announcement. Usually, mergers and acquisitions are meant to expand the operations of a
company (Brown).Similarly, the need to grow the Farmer Brothers coffees business has largely
contributed to the execution of this acquisition with the Boyd s Coffee Company. Mergers and

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acquisitions are strategic way o to grow business operations through penetration newer markets
through existing firms. The process of acquisition enables the acquiring firm to tap into the
already market.
In addition, the volume of processed coffee recorded a 5.3 per cent increase which is
remarkable following the acquisition of the Boyd’s Company (Farmer Bros). The increase in the
production and processing volume can be attributed to the expansion of operation facilities
which were acquired due to the merger agreement with Boyd Coffee Company (Farmer
Bros).Specifically, the gross profit margin increased by 5.3 percent while the gross margin went
up by 120 base points to the tune of 39.5per cent. Noteworthy, the performance of Farmer
Brothers after acquiring Boyd coffee company has increased).This can be evidenced by the
company’s Financial records increase in the total revenue by 0.9 per cent as contrasted with its
immediate competitors. Most of Farmer Brother Competitors recorded a revenue contraction
percentage of -10 in the third quarter of the year 2017(CSI Market).
The company s financial reports for the fourth quarter of the year 2017,shows that there is
significant reduction in net losses and increases in the production and processing of green coffee
following the agreement thus proving that the company is better off with the merger and
acquisition than without it.
How do you think the firm would have performed absent the acquisition?
Prior to the Acquisition of Boyd s Coffee Company, things weren’t going so well for
Farmer Brothers. In the year 2012,the Farmer Brothers had been experiencing significant
revenue losses due to the stiff competition it was receiving from Starbucks (Englander).Equally,
the Farmer Brothers weren’t making any profits since the year 2007 thus necessitating the need

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for the merger and acquisition of Boyd’s Coffee.Noteworthy,the preceding years to the Merger
were adverse for Farmer Brothers .In addition to the low profit margins, the company share
values have been going down the drain thus the necessitating the acquisition move. Specifically,
the share value of the Farmer Brothers company had deflated by fifty five percent from the
previous years. In a way, the lack of acquisition would have crippled the company s operations.
Consequently, with low profit margins, there is the likely to be low production and processing
levels which may in turn trigger the retrenchment of most of its employees to maintain its low
profit margins thus triggering the implementation of the Boyd s acquisition.
Conclusion
Why did the acquisition success or fail?
In my view the acquisition of Boyd s coffee by Farmer Brothers was successful. This
point of view can be supported by the fact that Farmer Brothers coffee company agreed to buy
out Boyd’s Coffee Company which is the first step towards a successful merger (Convenience
Store).Further the success of the acquisition is evidenced by the existence of an asset purchase
agreement which if fully executed will fulfil farmer Brothers company goals for purchasing the
Boyd s Coffee company. Single handledly,just by public knowledge that Farmers Brothers have
bought the Boyd’s coffee strengthens their presence in the region .Through the acquisition of
Boyd s coffee facilities, there has been increased production and processing of coffee by the
company which has translated into increased revenue, increased net sales and increased profit
margins for the company. Also, recent Farmer Brother company financial reports (unaudited
consolidated) reports show there has been an increase in profit margins and loss reductions
which is good for business.

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With the benefit of hindsight, if you were CEO of buyer, what would you have done
differently?
Essentially, a good merger or acquisition arrangement has various features. The ability
of a merger to help achieve company goals can be very effective in achieving the company goals.
Typically, merger goals include expansion of business territory, boosted sales, asset acquisition
and entry into newer markets are some of the common goals to be enforced through mergers and
acquisition (Aikens). Particularly, the Farmer Brother Company acquisition of the Boyd Coffee
Company in many ways encompasses this features. The acquisition is aimed at expanding the
Farmer Brother Company operation, enter new markets (Portland) and also access to the assets
previously owned by Boyd Coffee Company. Since the acquisition agreement, the Farmer
Brother Company has recorded increased sales, increased volumes of produced and processed
coffee thus proving successful for the company. Due to the mentioned reasons, I wouldn’t make
any contrary decisions to that of the Farmers Brothers company chief executive officer.
Lessons from the Study
Noteworthy, mergers and acquisitions are vital tools in expanding the operations of a
company. In addition, mergers and acquisitions are effecting in growing coming operations,
boost stock prices and boost efficiency .Owing to the benefits that come with mergers and
acquisition such as penetration new markets, company growth, creation of more employment
opportunities ,increases in profit margins for the business it is hard to resist going the merger and
acquisition route. However, for successful mergers and acquisitions, there is need to exercise
caution and factor in the risks of the acquisitions acting in the best interest of the company.

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Owing to the case study of the Farmer Brothers and the Boyd Coffee company, it is safe to say
that mergers and acquisitions has very attractive results from the company if properly thought
out and executed. However, mergers and acquisitions also come with risks and inefficiencies in
some cases thus making it imperative for companies to be well equipped to handle these
challenges

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Works Cited
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acquisition”.Aikenslawfirm.Com. Available at http://aikenslawfirm.com/5-characteristics-strong-
merger-acquisition/. Accessed 8 Jan 2018.
Bloomberg. (2018).Company overview of Farmers Bros. Bloomberg .Com. Available at
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=270566. Accessed
8 Jan 2018.
Bronigen, A. Bruce & Pierce. R. Justin. (2016) “Mergers may be profitable but are they good for
the Economy?” .Harvard Business Review. Available at https://hbr.org/2016/11/mergers-may-
be-profitable-but-are-they-good-for-the-economy. Accessed 8 Jan 2018.
Brown, Meredith (2010).Takeovers: A Strategic Guide to Mergers and Acquisitions. Available
from https://www.alibris.com/Takeovers-A-Strategic-Guide-to-Mergers-and-Acquisitions-
Meredith-M-Brown/book/6531972. Accessed 8 Jan 2018.
Convenience Store. (2017).Farmer Bros agrees to buy Boyd S Coffee. CS News. Available at
https: //csnews.com/farmer-bros-agrees-purchase-boyd-coffee-co. Accessed 8 Jan 2018.
CT Press. (2017). Farmer Brothers Announces Agreement to Acquire Boyd Coffee
Company.CtPress.Com. Available from http://coffeetalk.com/ctpress/08-2017/50856/. Accessed
8 Jan 2018.