Case Detail

Case Summary

The Best Deal Gillette Could Get? Proctor & Gamble’s Acquisition of Gillette

Case Number: 5-206-251, Year Published: 2006, Revision Date: August 05, 2009

HBS Number: KEL183

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Authors: David Stowell; Christopher D Grogan

Key Concepts

Mergers and Acquisitions, Valuation, Corporate Strategy, Compensation, Financial Strategy

Abstract

January 27, 2005, was an extraordinary day for Gillette’s James Kilts, the show-stopping turnaround expert known as the “Razor Boss of Boston.” Kilts, along with Proctor & Gamble chairman Alan Lafley, had just orchestrated a $57 billion acquisition of Gillette by P&G. The creation of the world’s largest consumer products company would end Kilts’s four-year tenure as CEO of Gillette and bring to a close Gillette’s 104-year history as an independent corporate titan in the Boston area. The deal also capped a series of courtships between Gillette and other companies that had waxed and waned at various points throughout Kilts’s stewardship of Gillette. But almost immediately after the transaction was announced, P&G and Gillette drew criticism from the media and the state of Massachusetts concerning the terms of the sale. Would this merger actually benefit shareholders, or was it principally a wealth creation vehicle for Kilts?

Learning Objectives

To understand the factors that persuaded shareholders of both P&G and Gillette to merge their companies, the valuation metrics involved in determining the merger consideration, compensation packages for key managers, and the politics (internal, local government, and regulatory) that impact major mergers.

Number of Pages: 18

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: Global

Industry: Consumer Products

Organization Name: Proctor & Gamble

Organization Department: Executive Management

Organization Size: Large

Decision Maker Position: CEO

Decision Maker Gender: Male

Year of Case: 2006