Case Study Procter Ang Gamble Merger With Gillette Marketing Essay

Case Study Procter Ang run a risk Merger With Gillette trade EssayIts being more than 100 years that Gillette Company manufactures consumer yields that make believe strong brand loyalty among the consumers near the world. Gillette sells produce mainly for man proponent a worry blades, razors and shaving preparations. Gillette also has a strong position universal in some of the female grooming products, such as copper products. Company is the worldwide leader in alkaline batteries and is also noted for its Oral-B in manual and power toothbrushes. The Company has employed nearly 30,000 mint globally and has 31 manufacturing plants in 14 countries.About Procter venture render It has its headquarter at Cincinnati.Employees No. of employees in the troupe are 110,000 in rough 80 countriesBrands Tide, Charmin, Folgers, Noxema, Pampers, Pringles and Pantene.Founded Procter Gm qualified was incorporated in 1837 at Cincinnati by William Procter, who was a examine maker and Jame s seek who was a soap maker. Both work force contributed $3,500 one thousand thousand to start the alliance as a startup fund. about four one thousand thousand times a day, PG brands touch the lives of people around the world. The company has one of the strongest portfolios of trusted, leadership brands and Quality which including Pampers, Tide, Ariel, Always, Whisper, Pantene, Bounty, Pringles, Charmin, Downy, Lenor, Crest, Actonel, Olay, Clairol Nice n light-colored and Head Shoulders(R). The PG community has almost 110,000 employees working in over 80 countries worldwide.Highlights of the case with important dates of MergerImportant Dates-January 28, 2005 Procter Gamble proclaimed their largest achievement in its history. They agreed to sully Gillette in $57 billion and this brood involved or combined some of the worlds largest and top most brands.January 27, 2005 Procter and Gamble agreed to issue 0.975 carry ons of its putting surface post in against each share of Gillette and this showed an18% premium to Gillette shareholders.In 1986 -Revlon had tried and attempted its beat out to takeover Gillette in 1986 but it was not victoryful to do so.In 1999- Procter and Gamble went with a proposal to Gillette but at that time Gillette refused the offer, then in November 2004, Gillette chief operating officer James M Kilts, started coalition talks with Procter and Gamble as he thought that it was the right time for such a move.Highlights of the Merger-The Merger was announced on January 28th 2005, Procter and Gamble decided to exchange 0.975 shares of its common stock for each share of Gillette. Thus, it leads to 18% of premium to Gillette shareholders. The amalgamation was approved by the shareholders of some(prenominal) the company. afterwardsward the conjugation Procter and Gamble immediately decided to buy bet on $18-22 billion of its common stock and this wholly process of buy back took 18 months to complete. later this process the make out was structured as 60% stock and 40% cash tummy, while it was purely a stock- swap on paper. When the compoundr happened everybody knew that Procter and Gamble combined with Gillette would become the worlds largest consumer product company with $60.7 billion annual gross gross revenue. At that time after the merger the new company decided to takeover Unilever which had total annual sales events of $48.25 billion at that time. Proctor and Gamble after the merger had brands of $21 billion with market place capitalization of $200 billion.Once the merger was make Procter and Gamble shareholders own approximately 71% of the combined company and Gillette shareholders owned 29% of the combined company. Both the companies expected that merger would bring commodious synergies. agree to the deal between the two companies Procter and Gamble would acquire whole Gillette bloodline which includes its technical, manufacturing and other facilities.Gillette and Proctor Gamble lo ok at almost identical history, culture and core strengths in branding, scale, inception and go to market capabilities, which do this merger a spotless one, people called this merger a perfect marriage because one innovative company acquired another innovative company to enlarge its product line and both companies faced low sales problem and both of them emerged as winners after app trickery same approaches. After acquiring Gillette as a whole Proctor and Gamble became the worlds second largest consumer products company with approximate sales of $61 billion. Procter and Gamble at the time of merger expected total gains and cost savings of $ 14 -$16 billion by lying off and eliminating 6000 peoples job.When Proctor and Gamble started running in profits it acquired brands which matched its strategy such as Germanys Wella AG hair tutorship line, it also acquired Clairol for its hair care lines and Iams Company known for its pet foods. After the merger PG had great earnings within few days as its net income jumped 12% from $1.8 billion to $2.04 billion. On January 27, trading in Procter and Gamble calls spiked to 8,172 contracts and Gillettes call spiked to 4,788 contacts. This means that both the company had add-on or more than five times the average daily volume. A single contract is equal to 100 shares.Hurdles after the merger-Procter and Gamble faced various challenges related to manufacturing facilities, workforce, work culture and integration of trading operations of the two companies which had functioned as an independent company for so long. According to the analysts lying off workers across countries is also a problem. Due to integration efforts train Procter and Gamble also had to overcome the risk of not being able to focus on its functioning.Main issues which do the merger importantAccording to the deal of Procter and Gamble and Gillette merger Procter and Gamble decided to exchange 0.975 shares of its common stock for each share of Gillette. P rocter and Gamble decided to buy back its common stock after the merger i.e. between $18-22 billion. This made the deal 60 % stock and 40% cash deal. Both the companies thought that the merger to will bring heavy synergies as both are the best companies and combination of these two companies will lead to strong brand portfolio. After the merger Gillette had got more opportunities to sell its products in various developing markets like China and East Europe.After the merger the combined entity layoff 6000 employees that are 4% of 140,000 combined work forces. This has to be done as both the companies had to mix in the headquarters and business operation units. The management is trying their best efforts to admit best employees from both the companies. Both the companies merger is an important and attractive deal as it has growth prospects, the gross and cost synergies are attractive and innovation pipelines are strong.Procter and Gamble decided about the potential regulatory or ant i- trust barriers of this deal that they will closely review the deal and result any issues regarding the product that are overlapping between the companies as they impart a good record of working with regulators in the competitive market place. Bankers involved in the deal were Merrill Lynch was representing Procter and Gamble and Goldman Sachs/UBS are representing Gillette. put up Merger ScenarioAfter the merger it was a great financial success for both the companies, especially for Procter and Gamble as growth in its revenue tripled, it was reported that the company would have more than $ 60 billion sales a year. Procter and Gambles unit volume had grown 27% and its net sales also grew by 27% and have reached to $18.34 billion. PGs net earnings have also increased by 29% and have reached to 2.55 billion. This merger has made Procter and Gamble the worlds number one household maker leaving poop Unilever in the second place. The combined companies have total 21 brands beneath i t and have the best global market position in product categories. After the merger the company will have more power to negotiate with advertising and media companies like television, newspapers, magazine and billboards.Gillette and Procter and Gamble are actively involved in pilots like testing and learning the technology, developing a scalable solution, drive development to deliver business benefits and validate the business case.Dealing with Wal-MartAfter the merger of Procter and Gamble and Gillette it had a great call for on Wal- Mart. As PG is one of the worlds largest consumer products company and after Gillette joined it its sale almost tripled and it gave the company a new competition with retailers like Wal- Mart. As it is said those retailers dont want its suppliers to be bigger than him and vice versa.Procter and Gamble merger with Gillette had put great pressure on various other consumer products firms like Nestle, Colgate- Palmolive, Unilever and Kimberly- Clark.Learni ngs from the case studyCase study of Procter and Gamble merger with Gillette helps us in learning followingPost merger scenario of both the companies after the merger.Procter and Gamble was interested in buying Gillette because it wanted to improve and run its product and target as many customers it basis.Both the companies agreed to merge because they knew it will be bring revenue, enlarge its product line and can become worlds largest consumer product company.It is a kind of friendly takeover that is with harmonize of take over company and with consent of majority of shareholders.Consideration for takeover is in the form of cash an stock both.Buy back of securities i.e. after the merger Procter and Gamble immediately decided to buy back $18-22 billion of its common stock.Merger effects on PG and Gillette competitors like Wal-Mart.Hurdle which both the companies faced after the merger.