In 2001, Tata Tea, an Indian tea-production company, took over Tetley, a U.K.-based tea-marketing giant more than twice its size, in a leveraged buyout. Tata Tea paid too much, as its bid was $100 million more than that of its nearest competitor, Sara Lee. The merger presented an array of vertical-integration synergies, but the leveraged-buyout structure, cultural differences, and lack of
... [Show full abstract] planning meant that the realization of synergies was delayed. The difficulties were exacerbated by the cyclical downturn in the tea industry and the increased competition from substitute products. This case illustrates (1) issues associated with cross-border merger integration, (2) scenarios where vertical integration makes sense and where it does not, (3) the application of PMI frameworks and concepts, (4) the issues associated with a leveraged-buyout structure, and (5) the trap of the winner's curse. See also the B case (UVA-BP-0479).