Question

1. Identity a recent merger or acquisition for Procter and Gamble (i.e., within the past 5 years) and, using appropriate quantitative indicators, prepare a written evaluation of its performance from the perspectives of managers, shareholders, and the public.

Answer 1

Business mergers and acquisitions (M&A) can be an effective strategy for growing the bottom line. Companies consolidate to remove excess capacity, increase market access, acquire technology more quickly than it could be built, develop new businesses, and improve the target company’s performance.

The Most Successful Mergers

The following three case studies show how companies achieved long-term success with M&As that had global reach. Each case study highlights the challenges the companies were facing, as well as the M&A processes they designed to meet those challenges.

Procter & Gamble Purchased Gillette

In 2005, Procter & Gamble (P&G) wanted to spark internal growth and innovation by incorporating Gillette’s processes into its own. A key to this integration was retaining top talent from the Gillette pool, which was no easy task as headhunters went after Gillette employees.

P&G tackled these challenges head on with a solid strategy. They took the time to research how these two companies could merge their best processes and talent into one profit-boosting entity. They did this by forming about 100 global integration teams.

In addition to retaining top Gillette talent, P&G was also facing a range of business disruptions, including government inquiries in Massachusetts, Gillette’s home state, and issues in India that erupted as a reaction to distributor changes.

To successfully create an atmosphere of collaboration took significant communication. They had to clearly communicate a message of inclusion. The communication component of their merger and acquisition process included carefully crafting all internal and external communication around the term “merger,” rather than “acquisition,” and holding town-hall-style meetings that drove home their principles.

P&G’s commitment to merging and learning from Gillette was carried out carefully across their global holdings. P&G created a mergers and acquisitions process that:

• Smoothed the transition period — In Brazil, for example, the general manager of the company for P&G shut down the office and reworked employee placement. On Monday morning, employees from both companies arrived to new offices on different floors instead of just placing Gillette employees into the already established layout. This signaled that P&G was willing to change as well, and both teams would work together in creating success for the new company.

• Involved internal stakeholders in their decision-making process — The decision-making was not limited to the highest-level executives. Instead, P&G welcomed Gillette with a role in the process.

• Made the merger easier for Gillette employees — Employees who joined P&G from previous business mergers reached out with advice to the Gillette employees through intranet postings. P&G also worked hard to establish cross-company connections, matching seasoned employees with the new Gillette employees. Through training programs that emphasized soft skills, such as network- and relationship-building, Gillette employees learned more about the purpose, values and principles driving P&G.

• Considered the practices and procedures in each country — Not only did P&G take the important step of establishing appropriate practices and procedures in each country, they also sought to actively incorporate any of Gillette’s processes that were working better than established P&G ones. Each country’s staff worked together to merge the best processes of both companies, investing both teams in the process. This motivated all staff and drove home P&G’s commitment to merging the best of both companies.

With this calculated approach to merging two companies into a single, stronger one, P&G experienced significant success. They managed to retain more talent from the acquired team than most buyers have been able to — 90 percent of Gillette’s top managers accepted their new job offers. P&G met their revenue and cost goals within a year and enjoyed ongoing growth.