ABSTRACT
When Nestlé paid $4.5 billion to take over the Rowntree Company in the United Kingdom in 1988, the financial community was staggered. The price tag was almost $1.5 billion more than the value being put on the company by analysts at the time. In the aftermath of dotcom mania, when the business world temporarily took leave of its accounting senses, it would be tempting to dismiss the seemingly exorbitant price as the result of a hyped-up bidding process. It was not. Nestlé simply evaluated the hidden assets of Rowntree’s famous confectionery brands (e.g., Kit Kat, Quality Street, Smarties, Yorkie, Rolo) and equated these with its own ability to leverage them. It paid five times Rowntree’s book value and has not looked back since.
