On Wednesday, Warren Buffett and the private-equity firm 3G Capital announced they would be merging H.J. Heinz with Kraft Foods.
Two companies don't combine just for the heck of it. They do it to increase value for shareholders.
One way managers do this is by eliminating redundancies in their efforts to cut costs.
They call it "synergy," which is a word that probably has every Kraft and Heinz employee a little nervous. The company explained in the news release:
The significant synergy potential includes an estimated $1.5 billion in annual cost savings implemented by the end of 2017. Synergies will come from the increased scale of the new organization, the sharing of best practices and cost reductions.
"Synergy" usually means the closing and combining of offices and warehouses, which also often comes with job cuts.
Heinz employs about 6,800 people in North America. Kraft employs about 22,000.
This is a very rough calculation. But assuming half of those potential synergies ($750 million) come from reduced headcount and each worker saves $150,000, this back-of-the-envelope calculation would see more than 5,000 employees being let go.
The companies haven't actually announced or quantified any reductions in headcount just yet. But you can bet that announcement is coming.
