Question

Risk, Reward and Deals

The story of the sale of the SpinBrush to P&G - more specifically, P&G's subsidiary brand Crest - also illustrates risk and reward management in many ways. John Osher and his team did not want to run a large company. They wanted to create a product line that would be attractive for an acquirer, particularly one of the major companies already in the oral care market. The goal, then, was to manage the risk that the company would fail, or would not be saleable in the future, and maximize the reward if the company was sold.

Why would a large company want to buy a company like Dr. John’s?

Answer 1

The brand of P&G is the larger global brand with its services for various markets in various aspects of fast-moving consumer goods (FMCG). Dental care is a part of the business of P&G which is a large brand with various offerings. However, for the business of Dr. John’s, the business is specialized into dental care with various different dental care instruments and products that is exclusive for dental care. The bigger brand P&G buys the business of smaller proportion like Dr. John’s gives it the benefits as:

Reward: The reward for the larger company like P&G is that it gets the technology, knowledge of dental care from a specialist like Dr. John’s which enhanced the brand repute. The variety of products are been enhanced by the brand like P&G which would give it some edge in one of its many product sectors like dental care.

Risks: For the brand like Dr. John’s, the brand got a profit by selling it to P&G to avoid the risk of closing down due to market competition. Both the brands got a good deal as the smaller one was sold which saved the assets and manpower it had from being disposed off, while the larger P&G got a more enhanced specific market edge.

Deal: The larger brand would get the business of Dr. John and its skills and dental knowledge to enhance its market share in this specific field of dental care which would make it be differentiated from its competitors in the markets with this specific edge. Hence the risk of the smaller brand of being sold with the capabilities it has is stopped while the larger brand P&G reduced its competitive risks by getting the edge in dental care apart from its various other product lines which makes it strong.