Please answer questions about case I posted below:

1.Do you think that faulty due diligence was a cause of the merger failure in this case?How so?

2.What could Quaker have done to better understand and test its plan to Swap distribution rights?

3.Could Quaker have known about the channel stuffing through diligence?

4.Should Quaker have known about the outsourced manufacturing contracts with minimum quotas before signing the deal?If they did discover it in diligence, what might they have done differently?

5.Same question for the out-of-stock issue.

6.Quaker did know that sales were plummeting, yet they decided to complete the deal and even improved the offer to an all-cash acquisition.What might they have done differently?Why do you think they went forward?

On November 2, 1994, Quaker Oats announced an agreement to acquire Snapple Beverage Corp for $1.7 billion.Quaker believed it could build Snapple into a vibrant, growing brand, just as it had done with Gatorade.It believed that synergies could be exploited by integrating the Snapple operation into its Gatorade organization.

Just 2 years and five months later, Quaker agreed to sell Snapple for $300 million, taking a $1.4 billion charge on the loss.

Distribution Synergy

Quaker had planned to streamline distribution in order to exploit cross-selling opportunities between Snapple and Gatorade - in fact,reconfiguring distribution had been a basic tenet of the Postmerger plan.

Snapple'sdistribution relied on more than 300 independent distributors. The distributors had exclusive rights within their territories to service supermarkets, restaurants, gas stations, and other "convenience chains and mom-and-pop markets".

Gatorade, in contrast, distributed its product directly from its bottling plants to the warehouses of supermarket chains.

ThePostmerger plan aimed to swap distribution rights: Quaker would grant Snapple's independent distributors rights to deliver Gatorade to the convenience chains and mom-and-pop stores. In exchange, Quaker wanted the distributors to hand over their supermarket accounts and let Quaker sell Snapple directly to supermarkets.

A journalist wrote, "The uproar was immediate.The plan gave Quaker the benefit of an already established Snapple supermarket business in exchange for a small-store Gatorade trade, yet to be built. Further, the independent distributors were making $4-per-case margins on Snapple - double what they would have been able to make on Gatorade.

Quaker was forced to shelve its plan to streamline distribution, a linchpin of its merger program.Forbes magazine wrote, "Only after it bought Snapple did it [Quaker] fully realize that Snapple's distribution system was completely different from Gatorade's."

Other problemsappearedafterthe merger:

1.Distribution: It was discovered that much of Snapple's growth before the acquisition had come fromcramming its distribution pipelinefull of inventory

2.Manufacturing: Snapple had had employed a production scheme whereby itoutsourced bottling operations to independent contractors. This procedure not only slowed production, but alsolocked Snapple into contracts with minimum bottling quotaseven when sales slowed. Quaker had to take a $30 million charge to buy out these bottling contracts.

3.Out of stock: Quaker encountered stock-out problems at Snapple, where it took weeks rather than days to fill orders.

4.Slowing sales: signs of this emerged before the definitive agreement had been signed.Late in the merger discussions, Snapple revealed to Quaker thatsales and profits for the year had plummetedand thatweakness was expected to continue throughout the year.

Snapple's owners insisted on an all-cash deal instead of the stock and cash plan originally proposed in the non-binding offer.Despite all of this, Quaker agreed to buy Snapple for $1.7 billion in cash.