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

Some analysts felt that the dark merger `cloud' might have a silver lining for competitors. Glenn MacDonald, Professor of Economics and Strategy at Washington University's Olin School of Business in St. Louis said, "When industries consolidate, that typically leads to more profits. Further, no merger ever goes as quickly or as smoothly as predicted and so competitors can take advantage of the disorganization that happens during a merger." He added that competitors could launch new products or strengthen their supply chain relationships during this time to gain an edge. Analysts feel that the consumer goods industry was ripe for consolidation. Many felt that a P&G-Gillette combination could be a transformative deal for the industry because of Gillette's growth potential. They also forecasted that this deal could lead to further consolidation in the industry. The costs of product innovation were quite high for razors, and some analysts feared that consumers might be getting fed up with ever-increasing prices for razors. Gillette had admitted in the past that it feared competition from low-cost rivals, particularly in its Duracell electric-battery segment. As for the argument of synergies, Bethany McLean of Fortune Magazine commented, "Personally, I think synergies are a lot like UFOs. Lots of people claim to have seen them, but few can actually prove they exist."