Bio Science Strategy Final

8/2/2019 Bio Science Strategy Final

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Boy meets Girl: M&A

Mohammad Daremi

Pankit Shah

Ritesh KumarSudhir Singh, Ph.D


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P&G and Gillette acquisition bringscomplementary strength and similar vision andculture to create the greatest consumerproduct company in the world


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P&G Products

Gillette Products

Major Product focus


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Product Segment

Fabric & Home care

Baby, Feminine & Family Care

Beauty Care

Health Care

Snacks & Beverages

300 branded products in more than

160 countries

GilletteP&G

Blades and Razors Duracell

Oral Care

Braun

Personal care

P&G annual report 2004Gillette annual report 2004


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Products - Post merger

Household and personal care

Food consumer

Heath care products


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M&A

1837 W. Procter & sap maker J. Gamble

Merger & Acquisitions

Spic & Span (1945)

Duncan & Hines (1956)

Chairman paper Mills (1957)

Clorox (1957) Folgers Coffee (1963)

Nippon Sunhome (1973)

Noxell (1989)

Max Factor (1991)

Baby wipe brand Kimberly-Clark (1996)

A

A

GilletteP&G

1901 King Gillette

Merger & Acquisitions

Toni Company (1948)

Papermate Pen Company (1950)

Oral B tooth Care (1984) Duracell (1996)

Fujian Nanping Battery (2003)

.and Finally P&G acquired Gillette (2005)1837 a small candle & soap shop to #1 fortune 500 companies in 2004

Source: Yasmeen Rizvi, Picking the flowers; Acquisition strategy as a tool for survival and growth. A caseanalysis of the acquisition of Gillette by Procter & Gamble


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There were four main reasons :

Improved product innovation

Stronger line of brands Creation of economies of scale

Better bargaining power to customers


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Innovation and competitive advantage

Diversification

Porters Three Generic Strategies

Marketing mix


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1. Product innovation and competitive advantage Chain reactions of innovation

Opportunity identification

Focus and direction

Idea generation Analysis and implementation

Management support

2. Products innovation at Procter & Gamble (P&G)


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3. Extensive lineup of Brands and diversification(Vertical and Geographical)

Economies of scale and Porters three generic strategy

Cost leadership strategies

Differentiation strategies

Focus strategies

Better offering and marketing mix


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Threat of competition: High

Economies of scale , advertising, value and quality

Threat of new entrance: Lowmoderate

Research and development, relationship with supplier, brand name, mature

markets

Threat of sudsiness: LowModerate

Necessities products, no substitute for detergent, but there is for snacks

Power of supplier: Low

Size of company attract suppliers

Power of Buyers: Moderate

15% of sales are to Wal-Mart, very demanding buyer, end consumers havedecision for substitute


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Aiken C., Keller S., 2009. "The irrational side of change management". The McKinsey Quarterly, Vol. 2, pp. 101-105.


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$57 B deal for all

stock

EXCHANGE DEAL:

0.975 shares of P&G

for every 1 share of

Gillette

Acquisition premium

at 18% for the

existing shareholders


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Buyback $18-22 Bof common stockduring next 12-18

months

Over time,

therefore, dealfinancially

structured as 60%stock and 40% cash

Webpronews(2005). Gillette Merger Facts. Retrieved March 1, 2008 fromhttp://www.webpronews.com/topnews/2005/01/29/pg-gillette-merger-facts


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High advertisement cost

dropped after acquisition

Sale promotion high

Higher revenue after acquisition increase the power of bargaining

Sale growth higher

Lay off some employees

Similarities of the Gillette and P & G organizations structuresMaximize brand strength and growth

Merging of P&G with Gillette, allowed the company to get rid of unwanted cost

Palepu, Krishna G. and Paul M. Healy. Business Analysis and Valuation Using Financial Statements. 4th ed. Thomson Southwestern 2008.


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Source: PG, JNJ, KMB, CL, and AVP 10k's; Unilever financials


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Phase 1 : Evaluating Option

Phase 2 : Analyzing Candidates

Phase 3 : Negotiation Due Diligence

Phase 4 : Closing the deal

Phase 5 : Integration Planning

Phase 6 : Integrating assets

* Doz, Y. L., and Hamel, G. (1998). Alliance advantage: The art of creating value through partnering, Harvard Business School

Press, Boston, MA.


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HR Issues and Activities

Communication

Building and Sustaining Trust

Training Program Career planning

Counseling

Coaching Line Managers workshop

* Harbison, J. R (1996). Strategic alliances: Gaining a competitive advantage, The Conference Board, New York.


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P&G India follows Go to Market model which istheir Golden Eye distribution model

Approach-> DistributorsSales Officer-RetailOutlets- Consumers

Four Major Regions: North, South, East and West

In-charge: Territory Sales In-Charge (TSIs), Area

Sales Managers' (ASMs)

* Sharma V.K., Sharma R.K.(2008). Cross-border merger and acquisition with special reference to India. Retrieved February 28,2008 fromhttp://www.indianmba.com/Faculty_Column/FC720/fc720.html


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Entering more product categories (38 v/s 12)

Expanding in existing product categories ( Focus on

middle class market)

Reaching consumers in more remote geographies

(more capital on media for short duration)

* Singh, R. (2004) Strategic Cost Management and Performance of Corporate Mergers and Acquisitions: An EmpiricalInvestigation of Selected Corporate Alliances in India


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Gillette India, continue to function as a separate legalentity.

GIL to shed its direct sales distribution model in

favor of P&G's traditional distributor set-up Relocation of some employees across functions to

Singapore

Change of its accounting year from January-

December to July-June

http://www.financialexpress.com/news/gillette-india-to-continue-as-separate-legal-entity/57414/0
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Bio Science Strategy Final