The proposed acquisition of Tim Hortons by Burger King will be the largest leveraged buyout of a Canadian-American restaurant chain and will make the merged entity the third largest fast-food company worldwide. The debate continues as to whether this is advantageous for Canadian Tim Hortons. I feel the merger will have adverse consequences to both brand images. It appears the relocation of corporate head quarters to Canada is a “tax inversion play” solely for tax avoidance purposes in the U.S.
From a management perspective, profit maximization tends to be the driving force behind a deal. Burger King is positioned in a highly competitive fast-food industry, with minimal product differentiation, so I understand why this deal is tempting. This deal has the possibility of backfiring. Firstly, the proposed “tax-evasion” scheme is unethical, disrupting the economy. Consumers may undertake a boycotting regime of the merged company, as there are ample substitute products. Secondly, the take-over of Tim Hortons by an American company destroys their value proposition and their successful patriotic All Canadian corporate and brand image they have worked hard to portray. Thirdly, the negative consequences that 3G Capital will implement on Tim Hortons possess the power to impact the company and the economy, with the restructuring of corporate internal management. Additionally, Burger King’s cost-driven business model has potential to harm Tim Hortons small business franchise owners who are trying to maximize their profits. Tim Hortons needs to ensure their business priorities and values are maintained if this take-over goes ahead and is to be a success.
Work Cited: http://www.cbc.ca/news/business/tim-hortons-takeover-by-burger-king-may-be-bad-for-canada-study-1.2818036