1. What is Procter&Gamble’s corporate strategy? Do the company’s businesses seem to be related or unrelated? Are Gillette’s businesses closely related to P&G’s businesses? How will a merger with Gillette result in a 1 + 1 = 3 effect for P&G?
2. How attractive are the industries/product categories in which P&G competes? What is the competitive strength of each of its business segments? Does Gillette seem to compete in attractive consumer segments? Are its business units strong in their respective markets? What does a 9-cell industry attractiveness/business strength matrix displaying P&G and Gillette’s business units look like?
3. Does Procter & Gamble’s business line-up exhibit good resource fit? How do Gillette’s profit margins compare to the profit margins for P&G’s businesses for the 2000-June 2005 time periods? Do both companies have similar growth rates and debt structures? How do the free cash flow and free cash flow productivity rates compare for the two companies? Does it seem that the addition of Gillette’s business units will boost the P&G’s bottom line?
4. What is your assessment of the $57 billion acquisition price Procter & Gambe paid for Gillette? Does the 20% purchase price premium seem appropriate? Are the sales and EBITDA multiples based on the $57 billion purchase price in line with other mergers in consumer goods industry? Does the 0.975 exchange ratio seem fair to both P&G and Gillette shareholders?
5. What strategic actions should Procter and Gamble executives undertake to ensure the Gillette acquisition ultimately benefits shareholders? What must be done to achieve the expected 1 +1 = 3 benefit? Should the company pursue additional acquisitions? Should certain business units be eliminated from the business lineup?
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