The P&G-Gillette Merger: A Dream Deal?

            

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Authors: Ruchi Chaturvedi N & Pradip Sinha,
Faculty Member, Associate Consultant
ICMR (IBS Center for Management Research).

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Integration Issues

Kilts would be the vice-chairman of P&G, and would lead the integration for a year. The merger would result in around 6,000 job cuts, equivalent to 4% of the two companies' combined workforce of 140,000. Most of the downsizing will take place to eliminate management overlaps and consolidation of business support functions.

Although managing cultural issues is very important in mergers, especially cross-border ones, in this case, such problems were virtually absent given the geographic proximity of the two firms' headquarters at Cincinnati and Boston.

However, P&G is considered a promote-from-within company, and already had a lot of executive talent at the top. Therefore, absorbing Gillette's management to their satisfaction could be difficult. According to some analysts, P&G's ability to handle this massive cultural assimilation would decide the success or failure of this acquisition.

According to Lafley, three potential categories that could help the combined company grow would be oral care, women's hair removal and male grooming. P&G could use its "technology transfer" ability (which refers to its drive to take technology from one brand and use it in another) for Gillette's products. Opportunities for product integration could also be possible in the $10 bn women's hair removal market that was growing at a rate of 8% per year. For example, it could apply some of its technology used in Olay skin care to Gillette's women's razors. A major focus area could be the invention of new products. In addition, P&G could promote Gillette brands together with compatible P&G products (Refer to Table III for potential products for co-promotion).

According to some analysts, P&G's acquisition of Gillette will result in an overlap/clash of some brands or products. P&G's Crest toothbrush, Old Spice, Secret and its battery will clash with Oral-B, Right Guard, SoftnDri and Duracell brands of Gillette. This will be a cause for concern for both companies.

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