305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?
“The consumer products industry needs to consolidate and I would rather lead that consolidation than get
stuck with the leftovers at the end.”1
– James Kilts, the chief executive of Gillette.
“P&G is very much structured around brands in which they can make a difference with innovation and
technology. Gillette fits perfectly — it’s a technology-based business in which they can add value.”2
– Steffen Lauster, a partner in Booz Allen Hamilton, a management consulting firm.
“This combination of two best-in-class consumer products companies, at a time when they are both
operating from a position of strength, is a unique opportunity.”3
– A.G. Lafley, chairman, president and chief executive of Procter & Gamble.

Procter & Gamble Company(P&G) and Gillette Company (Gillette), twoof theworld’s mostsuccessful
consumerproduct companies, announced the merger of their individual operations on January 28 th 2005.
While P&G was the number one US consumer goods company, Gillette was the world’s number one
maker of shaving supplies in terms of market share [Exhibit 1]. The merger of two of the world’s oldest
and most successful companies sent ripples through the consumer goods industry. The deal, which was
worth $57 billion, would enable P&G to acquire 100% ownership of Gillette. 4 The new company, with
more than 21 of the world’s mostpowerful brands in its portfolio, was expected to create the largest fast
moving consumer goods company (FMCG) in terms of revenues and market capitalisation. The
combination of Gillette’s proficiency in promoting male products and P&G’s expertise in marketing to
women was expected to wield a bargaining power large enough to rival the “Wal-Mart effect”5 , and
gain up to $16 billion in cost synergies.
The acquisition of Gillette by P&G was the ninth largest merger in US corporate history [Exhibit 2].
However, history showed that usually the size of a merger was inversely proportional to its chances of
success. In 1998, the much-touted “merger of equals” between Daimler-Benz and Chrysler Corporation
failed to achieve its merger targets. Similarly, although there were many synergies to be gained from
the P&G and Gillette merger, in order to reap the benefits, the new company had to deal with several
issues involving integration of diverse operating procedures, merger of different management styles,
possibilities of product overlap, corporate culture differences, customer retention, and the threat of
strong competition.

P&G, Gillette, and the Merger

P&G was established in 1837 when candle maker William Procter, and soap maker James Gamble,
merged their individual businesses. By 1859, the sales of Cincinnati-based P&G had reached $1 million
making it one of the largest companiesin the city.6 In the following years, P&G acquired a number of
businesses, becoming the number one US maker
1
Grant, Jeremy and Politi, James “Procter & Gamble strengthens its clout with retailers”, http://news.ft.com/, January 28th 2005
2
Sutel, Seth “Analysts like P&G-Gillette blockbuster”, www.modbee.com, January 29th 2005
3
“P&G Acquires The Gillette Company”, http://phx.corporate-ir.net/
4
Compiled by IBS-CDC from Colbert, Catherine “The Gillette Company: Overview”, http://premium.hoovers.com/ ; and Colbert, Catherine “The Procter & Gamble
Company: Overview”, http:/
/premium.hoovers.com/
5
The Wal-Mart Effect is named for price controls imposed by the world’s largest retailer - a low-price philosophy that tends to limit how much companies can charge for
the branded goods
6
Colbert, Catherine “The Procter & Gamble Company: Overview”, http://premium.hoovers.com/

This case study was written by Nusrath Jahan Maldar under the guidance of Srinath Manda, IBSCDC. It is intended to be
used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
The case was compiled from published sources.

© 2005, IBSCDC.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever
without the permission of the copyright owner.
 305-240-1

Gillette’s Merger with P&G: The

Distributed by The Case
Centre
North America Strategic
Rest of the Fit?
world

cas centre www.thecasecentre.org

All rights reserved
t +1 781 239 5884
f +1 781 239 5885
t +44 (0)1234 750903
f +44 (0)1234 751125

e e e
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

of household products. Its products were classified into three major categories: global beauty care;
global health, baby, and family care; and global household care. In 2001, P&G entered into the hair care
business by acquiring Clairol. Two years later the company acquired Wella hair care line for $5.7 billion,
its biggest acquisition to date. Wella, a Germany-based beauty care company that sold products in 150
countries, gave P&G a strong base in the international hair care market. By 2004, P&G had over 300
brands available in 160 different countries, out of which 16 brands were billion dollar sellers [Exhibit 3].7
It employed 1,10,000 employees globally, and made a profit of $6.5 billion on sales of $51 billion during
the sameyear [Exhibit 4].8 On a global scale, it was only second to Unilever, the giant Anglo-Dutch
consumer goods company.
Like P&G, Gillette was also a century old company. A salesman King Gillette and a machinist William
Nickerson established Gillette in 1901. King Gillette came up with the idea of developing a disposable
razor blade, and he, together with William Nickerson, invented the first safety razor. Gillette expanded
by diversifying into dental care, toiletries and battery businesses. It followed a policy of operating in
only those markets where its products were ranked either number one or number two [Exhibit 5].
Gillette invested heavily in product innovation and soon became famous for its cutting-edge technology
products. In 1989, Warren Buffet’s Berkshire Hathaway was the largest investor in the company with
11% of the company’s stock, which declined to 9% by 2004.9 Gillette employed 30,000 people globally
and was expected to make a profit of $2.3 billion on sales of $10.3 billion during the same year
[Exhibit 6].10
Both the companiesoperatedina fiercely competitive FMCG market. At this time thematuring industry
was characterized by the existence of strong brands, price wars, declining profits, and growing
competition from the retailers’ own brands. The companies in the FMCG market also faced the growing
threat of consumers being attracted by cheaper generic alternatives and moving away from their
branded products. The Standard & Poor’s 500 index consisting of top American companies showed that,
from 2000 to 2004, the sales of consumer goods companies included in the index had increased at a
compound annual rate of 4.7%, while their expenses had grown by 5% every year. 11 Due to these
difficult conditions, major FMCG companies including Unilever had missed several earnings targets, while
Colgate-Palmolive, another leading competitor, was enmeshed in restructuring its operations. However,
under the leadership of CEOA. G. Lafley, P&G had performed strongly in the past several years.
Likewise, Gillette with more than 72% of the US market share for blades and razors had shown
strong performance [Exhibit 7].12
Gillette CEO James Kilts initiated the merger talks in October 2004. After three months of secretly
held negotiations and talks, a consensus was reached and on January 28 th 2005 the two companies
announced the merger of their individual operations. The deal was finalized at a sum of $57 billion. It
was the largest US merger after the acquisition of Bank One Corp. by JP Morgan Chase for $58 billion in
the previous year. P&G agreed to issue 0.975 of its share for every share of Gillette. This amounted to
paying a premium of 18% on Gillette’s closing share price of the previous day.13 This transaction was
structured as a straight stock deal. Central to this merger was the possibility of extracting $14 billion to
$16 billion in cost savings every year. These cost synergies were expected to be gained through the
elimination of duplicated costs and by the proper coordination of purchasing and logistics in the new
firm. The merged firm would also cut 6,000 jobs, which amounted to laying off 4% of the
company’scombined 1,40,000 workforce.14 Most of these reductions would come from the consolidation
of business support operations and management overlaps. As per the agreement, P&G would acquire
100% of Gillette, which included all of Gillette’s manufacturing, technical and other facilities. On the
management side, James Kilts, the CEO of Gillette would stay on as P&G’s board of directors and join as
vice chairman- Gillette for a period of one year.
In view of the merger, P&G increased its target annual growth rate from 4%-6% to 5%-7%. Its
annual revenues were expected to reach more than $60 billion and its operating margins were
expected to increase from 19%-20% in 2004 to 24%-25% by 2010.15 With the addition of P&G’s billion
dollar brands to those of Gillette, post-merger P&G would have 21 billion dollar selling brands in its
portfolio [Exhibit 8]. The merged company would be number one in product categories accounting for
2
 305-240-1

66% of the total company sales.16 James Kilts said, “We believe we can bring these companies together
and create a juggernaut.” 17
7
“The Procter & Gamble Company: Overview”, op.cit.
8
“A marriage made in heaven—and in the bathroom”, www.economist.com, January 28th 2005
9
Colbert, Catherine “The Gillette Company: History”, http://premium.hoovers.com/
10
“A marriage made in heaven—and in the bathroom”, op.cit.
11
“The rise of the superbrands”, www.economist.com, February 3rd 2005
12
Berner, Robert “P&G: Razing Rivals with Gillette?”, www.businessweek.com, January 28th 2005
13
“P&G to acquire Gillette for $57bn”, http://news.bbc.co.uk/
14
Ibid.
15
Grant, Jeremy and Politi, James “Procter & Gamble strengthens its clout with retailers”, http://news.ft.com/, January 28th 2005
16
“P&G Powers Up with $57 Billion Gillette Purchase”, http://promomagazine.com/, February 1st 2005
17
“Huge mergers dominate markets”, www.canada.com, January 30th 2005

3
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

After the merger was announced, P&G also stated that during the next 12 to 18 months, it would
buyback $18 billion to
$22 billion of its common stock. This would financially amount to Gillette being purchased with 60%
stock and 40% cash.18 Subject to approval by P&G and Gillette’s shareholders and clearance by the
regulatory authorities the transaction was expected to be completed by late 2005.
After the announcement of the merger, Gillette’s share price increased 13% or $5.92 and closed at
$51.60. In contrast, the price of P&G’s shares fell 2.1% or $1.17 to close at $54.15 on the New York
Stock Exchange (NYSE).19 William Schmitz, an analyst with Deutsche Bank Securities, said, “Typically
you have one company that’s declining, one growing, but here you have two very solid companies
coming together with great innovation, great technology, great distribution and great products. P&G
shares are down today because of the short-term dilution concern, but the longer-term story is that you
will create this behemoth company.”20 Warren Buffet, the largest shareholder of Gillette, called the
merger a dream deal and stated his intention to increase his holding in P&G to 100 million
shares.

P&G and Gillette: Is the Merger a Strategic Fit?

The finalization of the merger-deal raised questions concerning the new company’s future strategy
and direction. The success of the acquisition depended upon how well P&G would be able to handle the
various administrative, logistical and technical challenges arising due to the merger [Annexure
1].
Adecade earlier, in the consumer goods market, the balance of power was in favour of manufacturers
like Unilever and P&G. However, according to the Institute of Grocery Distribution (IGD), a grocery sales
monitor, from 1980 to 2000, own- labeled products on the shelves of retailers had increased from
21.5% to 38.9%.21 Consequently, dominance of retailers like Wal-Mart (the US), Tesco (Britain),
Carrefour (France), and Aldi and Lidl (Germany) had grown, while the influence of the FMCG companies
had diminished. The conditions were such that three years ago, in Tesco’s biannual suppliers
conference, the powerful retailer had publicly criticized a company like Unilever for apparently offering
lower prices to Tesco’s rivals. Also Growing raw material costs and increasing pressure from retailers to
reduce prices had started squeezing the profit margins of even manufacturers like P&G. But, after the
merger, P&G was expected to regain much of the lost economic clout and sell products at better terms
to retailers. Robert Spector, author of ‘Category Killers: The Retail Revolution and Its Impact on Consumer
Culture’ (Harvard Business School Press) said, “This deal is about size versus size, and is a way for a
consumer products company to have a little more influence when it comes to product placement.22
Moody’s Investors Service also stated, “The combination of the two portfolios should allow the
combined companies to further strengthen their already strong position at retail, including with the
largest and increasingly powerful mass merchandisers.”23 But Al Ehrbar, chairman of Brand Economics,
a New York-based consultancy, said, “I’m highly skeptical that sellers banding together will do any good.
A combined company will be bigger but not necessarily better. Nobody’s going to be cowed by a
bigger P&G.”24
The acquisition of Gillette by P&G was the ninth largest merger in US corporate history. It created an
entity with more than
$60 billion in combined annual revenues, dethroning Unilever from its position at the top of FMCG
companies. But, the size and scope of the merger gave rise to speculation about the cost and benefit of
the deal. Pete Sorrentino, chief investment officer at Bartlett & Co, said, “It certainly looks expensive. It
cranks up the risk on (P&G’s) stock for the next couple years.” While Dan Popowics, equity analyst at
Fifth Third Bank, said, “They [P&G] paid an 18 percent premium for Gillette. That doesn’t mean they
overpaid.” Standard & Poor’s (S&P) equity analyst, Howard Chloe said, “On the surface it looks pricey,
but you’re acquiring a company that’s a leader in its category. It is a company that has been executing
very well. It’s not going to come cheaply.”25
At the time of the merger, P&G had more than $21.4 billion of debt, and Gillette had over $3.1
4
 305-240-1

Gillette’s Merger with P&G: The

billion of debt.26 The acquisition of Gillette would substantially increase
StrategicP&G’s
Fit? debt levels. In addition,
P&G’s planned repurchase of up to $22
18
“Analysts like P&G-Gillette blockbuster”, op.cit.
19
“Huge mergers dominate markets”, op.cit.
20
Boyer, Mike “Did P&G pay too much?”, http://news.enquirer.com, January 29th 2005
21
Rushe, Dominic And Fletcher, Richard “Gillette: The best this man can get”, www.timesonline.co.uk, January 30th 2005
22
Eckberg, John “Don’t expect price of products to change”, http://news.enquirer.com, January 29th 2005
23
“Moody’s places P&G, Gillette long-term debt rating on review”, http://news.newkerala.com, January 29th 2005
24
“Gillette: The best this man can get”, op.cit.
25
“Did P&G pay too much?”, op.cit.
26
Benson, Lisa “Ratings agencies might cut P&G, Gillette ratings”, http://boston.bizjournals.com, January 28,th 2005

5
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

billion worth of company shares would also be funded by debt. S&P’s credit analyst Patrick Jeffrey said
that the substantial increase in debt leverage would cause P&G’s credit protection measures to decline
in the intermediate term. Three of the world’s leading rating agencies booked both the companies for a
possible downgrade in the future. S&P placed all ratings of P&G and Gillette under credit watch.
Although Moody’s Investor Service confirmed the short term Prime-127 rating of the two companies, it
placed their long-term debt ratings on review for possible downgrades. Fitch Ratings cited expectations
of high debt levels in the future as well as delays on cost synergies and stated that it expected to
downgrade both the companies’ ratings on completion of the merger. Tom Razukas, managing director
at Fitch Ratings said, “We would expect that the combined company would still be very highly
rated.”28
Prior to the merger, P&G had virtually no presence in the men’s grooming products market. The
acquisition of Gillette enabled the company to enter this field in a big way. The market for men’s
products was expected to grow from $3.5 billion in 2004 to $8 billion by 2008.29 P&G was in a strong
position to take advantage of this growth. It could promote a new Olay male skin care cream under the
Gillette brand name or combine its existing Olay skin cream with Gillette’s women’s razor line. Such
possibilities were many. But the company also faced several cases of product overlap. Gillette’s Oral-B
product line competed directly with P&G’s Crest. Similarly, although Gillette had more customers through
its deodorant right guard, P&G was the overall leader due to its Sure brand. Lafley said that P&G planned
to keep as many of Gillette’s brands as possible.30 But, he also stated that some of the weaker product
lines might have to be jettisoned.31 After its previous acquisitions, P&G had already divested some of its
poorly performing businesses like Jif peanut butter and Crisco. Similarly, Gillette’s Duracell line of
batteries, which had not performed up to expectations, could also be dropped in the future.
Another potential area of conflict was the diverse promotion strategies employed by the two
companies. In 2004, P&G spent $2.13 billion on advertising, an increase of almost 7% from 2003. 32 The
advertising budget of P&G and Gillette together would amount to more than $3 billion.33 Mityas of A.T.
Kearney said that the new company could draw on “a larger pool of marketing dollars to strategically
invest in their brands.”34 However, prior to the merger, P&G’s promotion account was distributed
between the Publicis group’s Leo Burnett and Saatchi & Saatchi network, and WPP’s Grey network.
Gillette, on the other hand, employed Omnicomm group’s BBDO network and WPP’s Mindshare media
company. The possible inability of the new company to develop a mutually beneficial strategy could
create problems for the second largest US advertiser, P&G, and the 52nd largest US advertiser,
Gillette.
One of Gillette’s major strengths was developing cutting-edge technology products through
innovation. Historically, the cost of product development was very high for razors. P&G, on the other
hand, followed a strategy of acquiring other companies and products rather than investing heavily in
R&D. Additionally, both the companies also had strong, well-established manufacturing and operating
procedures. This brought into question P&G’s ability in integrating the diverse practices followed by
the two companies.
Some of the major reasons for the failure of large acquisitions were the resulting cultural clashes,
power struggles, and disruptions in the work force. P&G’s acquisition of Gillette was ten times larger in
size compared to its previous acquisition of Wella for $5.7 billion. P&G had no experience in handling a
merger of this size and scope. Although the goals specified during the Wella acquisition remained
achievable, the success or failure of the merger remained unclear in early 2005. In addition, P&G’s
infamous insular culture made a successful merger difficult to accomplish. Al Ehrbar said, “There would
be a clear advantage if Gillette was a poorly run company, but it’s not.”35 However, Lafley said, “Gillette
and P&G have similar cultures and complementary core strengths in branding, innovation, scale and go-
to-market capabilities, making it a terrific fit.” He added, “We will field the best team possible to lead
these new businesses, drawing from both Gillette and P&G management. We are pleased James M. Kilts,
Gillette’s chairman of the board, chief executive officer, and president will join P&G’s Board of
Directors and serve as P&G vice chairman – Gillette.”36

6
 305-240-1

Gillette’s Merger with P&G: The

Another important factor that could affect the success of the merger was the
Strategic response of the competitors.
Fit?
Stephan
27
Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations.
28
Peale, Cliff “Now P&G has a new target market: men”, http://news.enquirer.com, February 1st 2005
29
Ibid.
30
Peale, Cliff “Global giant sees chances for growth”, http://news.enquirer.com, January 29th 2005
31
“Analysts like P&G-Gillette blockbuster”, op.cit.
32
“Gillette: The best this man can get”, op.cit.
33
Ibid.
34
Grant, Jeremy and Griffith, Victoria “ ‘We can build a juggernaut’: P&G and Gillette lead the way through a new retail landscape”, Financial Times, Pg 11, February 4th 2005
35
“Gillette: The best this man can get”, op.cit.
36
“P&G Acquires The Gillette Company”, www.prars.com, January 28th 2005

7
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Newhouse, President of Morgan Stanley said that P&G’s competitors such as Unilever and Colgate-
Palmolive Co. would be reviewing their strategies in light of the Gillette purchase.Although Unilever was
facing problems due to falling sales, it was still a company with massive resources, capable of taking
advantage of the possible disorganization caused by P&G’s merger. In the past, L’oreal had gained
significant market share, when P&G had failed to capitalize on the opportunities presented by Clairol’s
Herbal Essence shampoos after acquiring the company.
Traditionally, the emerging markets of Asia were the strongholds of Unilever. Gillette also had
considerable distribution muscle in these areas. The emerging markets accounted for 20% of Gillette’s
sales, but contributed 60% to its growth.37 However, P&G lacked a strong base in the emerging
markets.After the merger, whether P&G would be able to capitalize on Gillette’s strength and
successfully establish its presence in the developing markets was another issue.
A major concern was the effect of the merger on the high degree of customer loyalty enjoyed by
Gillette. Vidal Sassoon, one of the haircare companies owned by P&G, had taken P&G to court in 2004.
Vidal Sassoon claimed that P&G had stopped the promotion and production of the Sassoon hair care line
in favour of its own competing brand Pantene. The two companies settled the lawsuit confidentially.
Similarly, if P&G tried to divest those brands of Gillette that competed directly with its products, the
resulting dilution of the Gillette brand could result in a major loss of customer loyalty and hence, decline
in sales.
Finally, the biggest threat of all was the risk of execution that involved the possible inability of P&G
to merge the two companies successfully. Robert Zagunis of Jensen Investment Management in
Portland said that execution was the key. “It really depends on (P&G’s) ability to integrate this into their
system and get the synergies,” he added. 38 Charles Hampden-Turner, co-author of Building Cross-cultural
Competence, said, “It doesn’t follow that your company is a better one simply because it has taken
another company over. It just means that you’ve got more money and have been prepared to pay. You
should sit down and learn from the acquired business. There may be expertise there that needs to be
respected.”39

8
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?
37
“‘We can build a juggernaut’: P&G and Gillette lead the way through a new retail landscape”, op.cit.
38
“Did P&G pay too much?”, op.cit.
39
Stern, Stefan “How to make a corporate marriage work”, Financial Times, Pg 7, February 7th 2005

9
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Exhibit 1
Fortune 500 Industry Data: Household and Personal Products Industry, 2003

Rank Company Fortune 500 Rank Revenues ($ millions)

1 Procter & Gamble 28 43,377
2 Kimberly-Clark 141 14,348
3 Colgate-Palmolive 196 9,903
4 Gillette 215 9,252
5 Avon Products 275 6,876
6 Estée Lauder 346 5,118
7 Clorox 416 4,171
8 Alberto-Culver 539 2,891
9 Stanley Works 543 2,860
10 Energizer Holdings 649 2,233
11 Blyth 896 1,400
12 Dial 919 1,355
13 Revlon 950 1,299

Source: www.fortune.com

1
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Exhibit 2
The Biggest Mergers in US Corporate History

Source: www.boston.com

Exhibit 3
The 16 Billion Dollar Brands of P&G
• Actonel
• Always/
Whisper
• Ariel
• Bounty
• Charmin
• Crest
• Downy/Lenor
• Folgers
• Head &
Shoulders
• Iams
• Olay
• Pampers
• Pantene
• Pringles
• Tide
• Wella

1
 305-240-1

Gillette’s Merger with P&G: The

Source: http://premium.hoovers.com/ Strategic Fit?

1
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Exhibit 4
Revenues and Profit of Procter & Gamble, 2001-2004

2004 2003 2002 2001

Annual Sales ($ mil.) 51,407.0 43,377.0 40,238.0 39,244.0

Annual Net Income ($ mil.) 6,481.0 5,186.0 4,352.0 2,922.0

Financial Overview of Procter & Gamble, 2004

Basic EPS $2.42

Price/Earnings Ratio 22.86
Current Ratio 0.85
R&D Expense (mil.) $1,802.00
Advertising Expense (mil.) $5,504.00
% Owned by Institutions 59.40%

Source: http://premium.hoovers.com/

Exhibit 5
Products and Production Units of Gillette

Product Categories/Brands (in order of size):

• Razors and Blades: Mach3, Venus, Sensor
• Batteries: Duracell Copper Top
• Oral Care: Oral B full range of manual and power toothbrushes
• Appliances: Braun shavers for men and Silk Epil epilators for women; Complete line of Braun
small appliances.
• Personal Care: Antiperspirants and Deodorants (Right Guard, Soft + Dri, Dry Idea); Shaving
Preparations (Gillette Series, Foamy, Satin Care) and Skiin Care (Gillette Complete line)
Billion Dollar Brands: Gillette, Mach3, Duracell, Oral B toothbrushes, Braun.
Manufacturing Plants: 31 plants in 14 countries (Brazil, Mexico, Belgium, Czech Republic, France,
Germany, Ireland, Poland, Russia, Spain, United Kingdom, United States, China, India)
R&D Centers: Germany, United Kingdom, United States
Source: www.pg.com

1
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Exhibit 6
Revenues and Profit of Gillette, 2000-2003

2003 2002 2001 2000

Annual Sales ($ mil.) 9,252.0 8,453.0 8,961.0 9,295.0

Annual Net Income ($ mil.) 1,385.0 1,216.0 910.0 392.0

Financial Overview of Gillette, 2003

Basic EPS $1.62

Price/Earnings Ratio 28.30
Current Ratio 1.09
R&D Expense (mil.) $202.00
Advertising Expense (mil.) $827.00
% Owned by Institutions 75.50%

Source:
http://premium.hoovers.com/
Exhibit 7
Comparison of Top Consumer Companies’ Share Prices

The best man can get?

Share prices, $terms, Jan 1st
Gillette Unilever
S&P L’Oreal
500
Procter & Gamble 17
5

15
0

12
5

200 0 0 10
3 4 5

Source:
www.economist.com

1
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Exhibit 8
P&G vs. Gillette
Company comparison, $bn
Procter & gamble* Gillette
Sales 51.4 10.3†
Profits 6.5 2.3†
Dividends 2.5 0.7‡
R&D spending 1.8 0.2‡

Leading Tide, Always, Iams, Mach3,

brands Pantene, Charmin, Gillette,
Bounty,Actonel, Crest, Oral-B,
Ariel, Downy, Pampers, Duracell,
Pringles, Folgers, Wella, Braun
Olay, Head & Shoulders
Employees 110,00 30,000
0
*year ending June
2004
†
2004
estimates‡2003.
Source: www.economist.com

1
 305-240-1

Gillette’s Merger with P&G: The

Strategic Fit?

Annexure 1
Steps in Making the Merger Work

• Should you be starting from here? Are there compelling strategic reasons for this deal? Or is
the company under pressure from investors and the media? Is the chief executive looking for a
last hurrah before moving on?
• Get your integration plan right. Set target dates for major decisions on structure.
• Define Key functions in the new entity– including finance, HR, IT, Legal – as soon as you can.
• Plan to resolve cultural differences; this will largely happen through good communication.
• Be careful to give some priority during the transition; employees will not be the only
stakeholders feeling unsettled.

Source: Financial Times