While the canard that many mergers fail to provide a return to shareholders does not appear to be supported by the data, mergers still occur that appear to be motivated by little more than a CEO’s desire to boost his company’s revenue--along with his compensation base--rather than long-run profits.
Today’s investors--and corporate board members--are more sophisticated and demanding than in the past, and no longer meekly go along with a CEO’s grand plans unless they are supported by a compelling rationale and substantial evidence that they will produce value.
For the recently proposed $50 million merger between Kimberly-Clark and Kenvue--the former consumer healthcare division of Johnson and Johnson that was spun off in 2020--it is fairly straightforward to grasp the potential benefits from combining the two companies. While the paper products like Kleenex and Huggies that Kimberly-Clark produces may appear to have little in common with the drug store staples like Tylenol and Neutrogena sold by Kenvue, the potential synergies are not in production but in the marketing and distribution.
The logic behind this kind of deal isn’t hard to grasp: The past few years exposed how vulnerable supply chains can be. The seismic economic impact brought forth by the pandemic rippled through the economy for years, and the threat of tariffs on global trade has been impacting international shipping almost since Donald Trump’s inauguration, with shortages and disrupted deliveries of essentials becoming increasingly common. By integrating production, distribution, and logistics networks, companies like Kimberly-Clark and Kenvue can better withstand those shocks--as well as reduce costs in more normal times.
The economies of scale that the merger will create should also engender more innovation. While the two companies produce goods that have been household staples for decades, the combined company will have myriad synergies that will streamline production processes and reduce costs.
Critics often frame deals like this as a threat to competition, but context matters. In the consumer health and wellness space, competition is increasingly global: European and Asian conglomerates dominate entire categories, and they have the advantage of both size and integration. Allowing American companies to combine their strengths is a strategy for survival and success on the world stage. The alternative is to let domestic firms remain fragmented and vulnerable while foreign rivals consolidate power and market share.
This deal--and other mergers similar to it--reflect a growing confidence in the enduring strength of the American economy. For companies to invest billions in growth, they must believe that the U.S. economy will continue to grow, and that its regulatory environment, workforce, and capacity to reward innovation will remain largely unchanged. After years of regulatory bottlenecks that chilled deal-making, the renewed momentum in mergers and acquisitions suggests that American business is ready to build again.
What’s striking about the Kimberly-Clark–Kenvue story is how grounded it is in the everyday economy. These aren’t speculative technology ventures or abstract financial plays: They are companies that produce products that people use and depend on almost every single day. And while the industry may not be as sexy as AI, the caliber of people employed by Kimberly Clark is remarkably high--when I was a professor in the University of Wisconsin system in the 2000’s I taught an MBA class geared exclusively for Kimberly-Clark executives, and to this day I remain impressed by the caliber of the students I encountered.
Mergers that benefit shareholders also--ultimately--benefit consumers as well by reducing costs and improving the quality of goods and the reliability of their supply chains. The Kimberly-Clark–Kenvue deal would create an American partnership built on American manufacturing.
When we have an environment that encourages corporate investments it strengthens the foundation for long-term economic growth. The Kimberly-Clark–Kenvue deal offers a blueprint for how thoughtful growth can boost global competitiveness and reduce costs.
