Question

C6_Case study1: (from Mergers, Acquisitions, and Other Restructuring Activities (7th Edition))

Discussion Questions

1. Why is it often considered critical to integrate the target business quickly? Be specific.

2. Given the complexity of these two businesses, do you believe the acquisition of Gillette by P&G made sense? Explain your answer.

3. Why did P&G rely heavily on personnel in both companies to implement postclosing integration?

4. Why do you believe P&G was unable to retain most of Gillette’s top managers following the acquisition?

Answer 1

1. Why is it often considered critical to integrate the target business quickly? Be specific.

• The acquirer has already paid the price for synergies at the time of acquisition. If integration is delayed, realization of synergies is also delayed thus leading to value erosion.
• Delay in integration leads to loss of customer, loss of employees and other cultural issues.
• Delay in integration at times lead to disruption in the ordinary business of the target

2. Given the complexity of these two businesses, do you believe the acquisition of Gillette by P&G made sense? Explain your answer.

Yes, the acquisition made sense because it opened gate for P&G into areas and geographies where it would have otherwise taken significant time and resources to reach.

• The combined entity rose to numero uno position in FMCG sector, post acquisition.
• P&G got access to some of the best brands of Gillete
• Improved financial muscle as Gillet was highly profitable at the time of acquisition
• Strengthened the position of P&G in markets like India and Brazil against its arch rival Unilever (erstwhile Hindustan Lever Limited)

3. Why did P&G rely heavily on personnel in both companies to implement postclosing integration?

• Post closing integration is better handled by the employees who are aware of best practices of the organization and sensitivities and cultural issues of the organization. The employees thus ensure smooth integration.
• It's the employees from the target and the acquirer side who have to come together and make things work.

4. Why do you believe P&G was unable to retain most of Gillette’s top managers following the acquisition?

• Cultural mismatch
• Consolidation of markets led to redundancies. Affected managers from Gillette left.
• Integration of businesses led to redeployment of employees of Gillete into different areas which failed to retain the top managers.
• Poaching of the Gillette's top management