After graduating from college in 2000, Justin Gold spent a year in California before settling in Boulder, Colorado. He waited tables to pay the rent and enjoyed outdoor activities including hiking, climbing, and exploring. Gold was a vegetarian, and to get the protein he needed he started eating a lot of peanut butter and nut butter. He owned a food processor and found that making peanut butter was easy. To spice things up he started making different flavors of peanut butter by adding ingredients such as honey, cinnamon, dried blueberries, and banana chips. Gold’s roommates loved his peanut butter and kept stealing it from the refrigerator. To discourage the thievery, Gold, in a good-natured way, scrawled his first name—Justin’s—across each jar. Gold’s roommates encouraged him to set up a table at the Boulder Farmer’s Market to see if his nut butter would sell. He gave it a try and found that people really liked it. The experience got Justin thinking. To sell at the Boulder Farmer’s Market he had to make his nut butter in a U.S. Food and Drug Administration (FDA)–approved facility. Today, many states allow small producers to make certain items out of their homes, but that was not the case in Colorado at the time. Gold figured that if he was going to the trouble of using an FDA-approved kitchen to make his nut butter for the farmer’s market, he might approach some stores as well....

Discussion Questions:

1.According to the case, Hormel acquired Justin’s to add to the strength of its peanut and nut butter offerings and to add a product to its portfolio that appealed to younger, more health-conscious consumers. Why did you think Hormel acquired Justin’s to achieve its objectives instead of creating a similar product from scratch in its own research and development labs?
2.Why do you think Justin’s did not try to raise additional funds to acquire more resources to manage its growth rather than selling to Hormel?
3.Assume that you were a loyal Justin’s customer when Hormel announced that it was acquiring the firm. Would you react negatively to this acquisition?
Why or why not?
4.What is a liquidity event? Why do firms that take money from investors strive to find a liquidity event within a five- to seven-year timeframe? In your judgment, did Justin’s have a favorable exit (or liquidity event)? Explain your answer.