Part 1 : Reasons why Natura acquired Avon :

a. With the acquisition of Avon, Natura would be able to create the 4th largest beauty and cosmetics
company resulting in higher market share and customer base in comparison to the competitors and
resulting in more multi-brand and multi-channel acquired group.
b. With the acquisition, Natura would be able to create the largest company in terms of direct selling.
This is because both Natura and Avon had a very strong direct selling model, that would help the
newly formed company to have strong customer approaching model.
c. With the acquisition of Avon, Natura would be in a position to have $150 million to $200 million
of annual cost savings, which is actually a very good savings for any company.
d. Natura would have a strong consultant base for approaching the customers all over the global i.e.
approximately 6.3 million consultants to reach out more than 200 million customers.

Part 2 : Benefits of acquisition to Avon :

a. It has been seen that Avon has been struggling really hard to maintain its customer base over the
years and it wasn't able to beat its competition Natura in Brazilian market. With the acquisition,
Avon would have a strong presence in the beauty and cosmetics industry as this acquisition would be
the 4th largest acquisition in the industry.
b. With the acquisition, Avon would be able to cater all other customers such as young customers
who it failed to attract of it own. Natura has a good presence among the youth after acquiring The
Body Shop and Aesop. Therefore, Avon would have a strong customer base that would help it to
survive in long run.
c. Now, Avon would have a stronger e-commerce (digital platform) for targeting its customer along
with direct selling model.
d. Rise in the share price of the company in the market would help the company to have more access
to funds.

Part 3 :
Acquisition is a business activity in which one company acquires all or some portion of another
company's share resulting in having control and ownership. Acquisition helps to create some of the
great industry leaders because of following advantages it provides :
a. Increase in the market share and power for the acquiring company, even if there is high
competition in the market, with the acquisition the company is able to create a pressure on
competition by having competitive edge.
b. Gain of competencies helps the acquiring company to have more access to competencies it lacked
and use of more resources. Resources could be in terms of financial aid or non-financial aid (such as
fresh ideas, experts supports, etc.), both would help the company to have higher revenue generation
and scope of improvement in the financial position of the company.

Part 4 :
The major challenges to the acquisition as stated for above case would be:
a. There would be difficulties in the integration of cultural diversity for both the companies due to
different market approaches.
b. Since, both the companies have competencies of direct selling model, it might lead to duplication
of product and selling approach.
c. Because of many years of struggle of Avon, sustaining the same brand image would be quite
difficult that could even hamper the formed company's image.
Part 5 :
Synergy in basic sense means when two or more companies comes together as a new company, they
will be able to generate and achieve higher results with the given resources i.e. the formed company
would be able to generate higher results along with increased value.
The major effects of synergy in an acquisition could be both positive effect and negative effect. The
positive effect would help the acquisition to have more cost saving approach, new idea generations,
appreciation of each company's idea, etc. and on the other hand, negative effect would create
situation of difficulties in working of formed company such as difficulty in managing the company
due to different leadership approaches, difficulty in accepting the different corporate cultures, etc.