Merger And Aquisition Bs


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  • Merger And Aquisition Bs

    1. 1. Under the guidance of our respected Professor- Prof S.V.Bidwai
    2. 2. Submitted by: Pranav Jalan 08BS0002278 Pravesh Surana 08BS0002328 Prerna Singhal 08BS0002 Priyanka Bhuwania 08BS0002372 Rahul Chandalia 08BS000 Rahul Jain 08BS0002500 Ravi Somani 08BS0002638 Rohit Kothari 08BS0002751 Date 12 th November;09
    3. 3. <ul><li>Introduction </li></ul><ul><li>Past History </li></ul><ul><li>M & A Process </li></ul><ul><li>Reasons and Issues </li></ul><ul><li>Strategic Approach to M&A </li></ul><ul><li>Takeover Strategies and Defenses </li></ul><ul><li>Issues and Defects </li></ul><ul><li>Attributes to effective acquisition </li></ul><ul><li>Legal Procedure </li></ul><ul><li>Caselets: </li></ul><ul><ul><li>P&G and Gillette </li></ul></ul><ul><ul><li>Tata-JLR </li></ul></ul><ul><ul><li>Tata-Corus </li></ul></ul><ul><ul><li>Adidas-Reebok </li></ul></ul><ul><li>Case Study </li></ul>
    4. 4. Corporate restructuring is the reorganization of corporate entities. The reorganizing can be within the company itself or with the involvement of other corporate entities.  A strategy to change business or financial structure.  Radical changes in composition  Process of redesigning.  Example ‟ GE witnessed tremendous growth during tenure of Jack Welch  Necessity when the company has grown to the point.  Crucial whenever there is a major shift.  Continuous process.  Result - leaner, more efficient, better organized, and better focused .
    5. 5. <ul><li>Financial Restructuring ‟ Includes raising the finance, decisions regarding mergers, joint ventures and alliances </li></ul><ul><li>Operational Restructuring ‟ Reformulate the company on basis of change in technology and environment requirements </li></ul><ul><li>Organizational Restructuring ‟ In order to increase efficiency redefining the organizational structure or the processes or the systems. </li></ul><ul><li>Market Restructuring ‟ Is the addition of a newer product or shifting one product or segment to another or enlarge the market for the exiting products. </li></ul>
    6. 6. <ul><li>Culture. </li></ul><ul><li>Inadequate focus and commitment of top management towards change program </li></ul><ul><li> &quot;What is in it for me&quot; attitude </li></ul><ul><li> Mind set/resistance to change </li></ul><ul><li> Lack of involvement of employees </li></ul><ul><li> Poor planning </li></ul><ul><li> Resource Availability </li></ul><ul><li> Cost and time </li></ul><ul><li> Poor communication </li></ul>
    7. 7. <ul><li>Expansion </li></ul><ul><li>Sell offs </li></ul><ul><li>Corporate control </li></ul><ul><li>Changes in ownership structure.. </li></ul>
    8. 8. <ul><li>A MERGER happens when two firms, often about same size, agree to go forward as a new single company rather than remain separately owned & operated by pooling all their resources together , to create a sustainable competitive advantage . For example,both Daimler-Benz & Chrysler ceased to exist when two firms merged, and a new company ’Daimler-Chrysler’ was created. </li></ul><ul><li>When a Company takes over another one & clearly becomes the new owner ,the purchase is called ‘ ACQUISITION ’. Unlike mergers, acquisitions can sometimes be unfriendly . i.e., when a firm tries to takeover another by adopting hostile measures. </li></ul>
    9. 9. <ul><li>Mergers and Acquisitions M&A ,have become very popular strategy all over the world in last 3 decades . </li></ul><ul><li>The value M &A WORLDWIDE increased from $464 Billion in 1990 to $3.4 trillion in 1999-2000 , followed by sharp decline during 2001 & 2002.It has again shown improvement from 2003 onwards. </li></ul><ul><li>India born Laxmi Nivas Mittal has taken over Arcelor in Europe , to form a largest Steel making Company in Europe-” Arcelor-Mittal .”(117 Mtons/Year-Global) . </li></ul><ul><li>Tata Steel-Corus(UK) Acquisition by Tata Steel for $12 Billion is very significant and a landmark for the Indian Corporate World. (28 Mtons/Annum-2006) </li></ul>
    11. 12. Company-specific Risk Cost-of-capital reduction Operating Synergy Scale Economies Improve margins Financial Synergy Redeploy capital Increase ROI Managerial Synergy Improve management or replace inefficient one Market Valuation Release “value”
    12. 13. <ul><li>The 1895-1904 Merger Movement. </li></ul><ul><li>The 1922-1929 Merger Movement. </li></ul><ul><li>The 1940-1947 Merger Movement. </li></ul><ul><li>The 1960s Merger Movement. </li></ul><ul><li>Post 1980 Merger Movement. </li></ul>
    13. 14. <ul><ul><li>Majorly of Horizontal mergers. </li></ul></ul><ul><ul><li>Merging for Monopoly in order to eliminate competition. </li></ul></ul><ul><ul><li>Case: JP Morgan merged with Carnegie Steel. </li></ul></ul><ul><ul><li>Ended in 1904 due to severe economic recession. </li></ul></ul>
    14. 15. <ul><ul><li>Majorly of Vertical mergers. </li></ul></ul><ul><ul><li>Merging for Oligopoly. </li></ul></ul><ul><ul><li>Case: FORD- manufacturing tyres of car from rubber plantations in Brazil. </li></ul></ul><ul><ul><li>Ended in 1929 with stock market crash of Black Tuesday. </li></ul></ul>
    15. 16. <ul><li>Conglomerate Merger. </li></ul><ul><li>Occurred during booming American economy. </li></ul>
    16. 17. <ul><li>Hostile takeover. </li></ul><ul><li>Birth of LBO. </li></ul><ul><li>Mega-Merger & Cross border merger. </li></ul>
    17. 18. <ul><li>A = Amalgamating Company: Ceases to Exist </li></ul><ul><li>B = Amalgamated Company </li></ul><ul><li>B receives all of A’s assets and liabilities </li></ul><ul><li>Shareholders of A receive shares in B and maybe other benefits like debentures, cash </li></ul><ul><li>Transfer assets and liabilities </li></ul>A B
    18. 19. <ul><li>A, B and C = Amalgamating Companies: Cease to exist </li></ul><ul><li>D = Amalgamated Company: may or may not have existed before Merger </li></ul><ul><li>All assets and liabilities of A, B and C transferred to D </li></ul><ul><li>Shareholders in A,B and C get shares in D. </li></ul>A D B C
    19. 20. <ul><li>Demergers are one type of spin-offs: under s. 391 </li></ul><ul><li>A = Demerging Company </li></ul><ul><li>B = Resulting Company: may or may not have existed earlier </li></ul><ul><li>A transfers undertaking to B </li></ul><ul><li>B issues shares to shareholders of A </li></ul>X Y Y Company B Company A Transfers undertaking Y Shareholders of A Issues shares
    20. 21. <ul><li>Develop a strategic plan for the business.( Business Plan ) </li></ul><ul><li>Develop an acquisition plan related to the strategic plan.( Acquisition Plan ) </li></ul><ul><li>Search companies for acquisitions.( Search ) </li></ul><ul><li>Screen and prioritize potential companies.( Screen ) </li></ul><ul><li>Initiate contact with target. </li></ul><ul><li>Refine valuation, structure the deal and develop financial plan.( Negotiation ) </li></ul><ul><li>Develop plan for integrating the acquired business. ( Integration Plan ) </li></ul><ul><li>Obtain all necessary approvals and implement closing. </li></ul><ul><li>Implement post closing integration. </li></ul><ul><li>Conduct a post closing evaluation. </li></ul>
    21. 22. <ul><li>According to Drucker, financial factors provide stimulus for merger activity. He says that mergers should follow five rules, in order to be economically viable. </li></ul><ul><li>The acquirer must contribute something to the acquired company. </li></ul><ul><li>A common core of unity is required. </li></ul><ul><li>The acquirer must respect the business of the acquired company. </li></ul><ul><li>Within a year or so, the acquiring company must be able to provide top management to the acquired company. </li></ul><ul><li>Within the first year of the merger, managements in both companies should receive promotions across the entities </li></ul>
    22. 23. <ul><li>Horizontal mergers: </li></ul><ul><ul><li>A horizontal merger involves two firms operating and competing in the same kind of business activity. </li></ul></ul><ul><ul><li>Textiles firm merges raw materials firm. </li></ul></ul><ul><ul><li>- Example: Exxon - Mobil </li></ul></ul><ul><li>Vertical mergers: </li></ul><ul><ul><li>Vertical mergers occur between firms in different stages of production operation. </li></ul></ul><ul><ul><li>- Example: Helene Curtis and Unilever </li></ul></ul><ul><li>Conglomerate Mergers: </li></ul><ul><ul><li>- Conglomerate mergers involve firms engaged in unrelated types of business activity </li></ul></ul><ul><ul><li>- Example: General Electric buying NBC television </li></ul></ul><ul><li>Concentric Mergers </li></ul><ul><li>- Based on specific management functions where as the conglomerate mergers are based on general management functions </li></ul><ul><li>- Example: Citigroup (principally a bank) buying Salomon Smith Barney (an investment banker/stock brokerage operation </li></ul>
    23. 24. Problems in Achieving Success Reasons for M & A Integration difficulties Inadequate evaluation of target Too much diversification Large or extraordinary debt Inability to achieve synergy Managers overly focused on acquisitions Too large Increased market power Overcome entry barriers Lower risk compared to developing new products Cost of new product development Increased speed to market Increased diversification Avoid excessive competition M & A
    24. 25. Reasons for M & A Example: Belgian-Dutch Fortis’ acquisition of American Banker’s Insurance Group Example: Watson Pharmaceuticals’ acquisition of TheraTech Example: British Petroleum’s acquisition of U.S. Amoco Increased Market Power Acquisition intended to reduce the competitive balance of the industry Overcome Barriers to Entry Acquisitions overcome costly barriers to entry which may make “start-ups” economically unattractive Buying established businesses reduces risk of start-up ventures Lower Cost and Risk of New Product Development
    25. 26. Example: General Electric’s acquisition of NBC Example: Kraft Food’s acquisition of Boca Burger Example: CNET’s acquisition of mySimon Reasons for M & A Increased Speed to Market Closely related to Barriers to Entry, allows market entry in a more timely fashion Diversification Quick way to move into businesses when firm currently lacks experience and depth in industry Reshaping Competitive Scope Firms may use acquisitions to restrict its dependence on a single or a few products or markets
    26. 27. Problems with M & A Example: Marks and Spencer’s acquisition of Brooks Brothers Example: Intel’s acquisition of DEC’s semiconductor division Example: AgriBioTech’s acquisition of dozens of small seed firms Integration Difficulties Differing financial and control systems can make integration of firms difficult Inadequate Evaluation of Target “ Winners Curse” bid causes acquirer to overpay for firm Large or Extraordinary Debt Costly debt can create onerous burden on cash outflows
    27. 28. Example: Ford and Jaguar Example: Quaker Oats and Snapple Example: GE--prior to selling businesses and refocusing Problems with M & A Managers Overly Focused on Acquisitions Inability to Achieve Synergy Justifying acquisitions can increase estimate of expected benefits Overly Diversified Acquirer doesn’t have expertise required to manage unrelated businesses Managers may fail to objectively assess the value of outcomes achieved through the firm’s acquisition strategy
    28. 29. Present Situation Strategy Growing steadily but in a mature market with limited growth Acquire a company in a younger market with higher growth rate Operating at maximum productive capacity Acquire a company making similar products operating substantially below capacity Under-utilizing management resources Acquire a company into which the talents can be extended Marketing an incomplete product range , or having the potential to sell other products or services to your existing customers Acquire a company with product range which is complementary
    29. 30. Lacking key clients in a targeted sector Acquire a company with right customer profile Need to increase market share Acquire an important competitor Need to widen capability Acquire a company with key talents and/or technology Need more control of suppliers or customers Acquire a company which is, or which gives access to a significant customer or supplier Preparing for floatation but need to improve balance sheet Acquire a company with the right customer profile
    30. 31. <ul><li>Kinds of takeovers: </li></ul><ul><li>Negotiated or Friendly Takeover </li></ul><ul><li>The existing management of a company decides to give away the control of the company to another group on terms and conditions mutually agreed upon by both the parties. </li></ul><ul><li>Open market or Hostile Takeover </li></ul><ul><li>A group acquires shares of a company from the open market in order to take control of the company </li></ul><ul><li>Eg:Autoriders’ Hostile Takeover Bid for Saurashtra Cement </li></ul><ul><li>Bail-out Takeover </li></ul><ul><li>When a financially sick company is taken over by a profit earning company in order to bail out the former ,it is called a bail-out takeover. </li></ul>
    31. 32. <ul><li>Tender Offer </li></ul><ul><li>General offer made publicly and directly to a firm’s shareholders to buy their stock at a price well above the current market price. </li></ul><ul><li>Street Sweep </li></ul><ul><li>The acquirer accumulates large amounts of the stocks in the target company before making the open offer </li></ul><ul><li>Bear Hug </li></ul><ul><li>The acquirer tries to put pressure on the management of the target firm by threatening to make an open offer </li></ul><ul><li>Strategic Alliance </li></ul><ul><li>An acquirer offers a partnership rather than a buyout of the target firm. </li></ul><ul><li>Brand Power </li></ul><ul><li>The acquiring firm enters into an alliance with other powerful brands to displace the competitor’s brand. </li></ul>
    32. 33. <ul><li>Economic Issues </li></ul><ul><li>Legal Issues </li></ul><ul><li>Public Policy Issues </li></ul><ul><li>Powers of financial institutions </li></ul><ul><li>Proxy wars </li></ul>
    33. 34. <ul><li>Effects on the Acquirer Company </li></ul><ul><li>Effects on the Target company </li></ul><ul><li>Effects on the Shareholders of the Target Company </li></ul><ul><li>Effects on the Shareholders of Acquiring Company </li></ul>
    34. 35. <ul><li>Golden Parachutes </li></ul><ul><li>Poison Put </li></ul><ul><li>Anti-takeover Amendments </li></ul><ul><li>Super majority amendments </li></ul><ul><li>Fair price amendments </li></ul><ul><li>Classified boards </li></ul><ul><li>Authorization of preferred stock </li></ul><ul><li>Poison Pill Defense </li></ul><ul><li>Targeted Share Repurchase and Standstill Agreements </li></ul><ul><li>Other Takeover Defences </li></ul>
    35. 36. <ul><li>A fundamental characteristic of merger is that the acquiring company takes over the ownership of other companies and combines their operations with its own operations. </li></ul><ul><li>An acquisition may be defined as an act of acquiring effective control by one company over the assets or management of another company without any combination of companies. </li></ul>
    36. 37. Attributes of Effective Acquisition s Complementary Assets or Resources Buying firms with assets that meet current needs to build competitiveness + Friendly Acquisitions Friendly deals make integration go more smoothly + Careful Selection Process Deliberate evaluation and negotiations is more likely to lead to easy integration and building synergies + Maintain Financial Slack Provide enough additional financial resources so that profitable projects would not be foregone +
    37. 38. Attributes of Effective Acquisitions Low-to-Moderate Debt Merged firm maintains financial flexibility + Flexibility Has experience at managing change and is flexible and adaptable + Emphasize Innovation Continue to invest in R&D as part of the firm’s overall strategy +
    38. 39. <ul><li>TRANSACTION STRUCTURE </li></ul><ul><li>Companies Act </li></ul><ul><li>Income Tax Act </li></ul><ul><li>Stamp Acts </li></ul><ul><li>Competition Act </li></ul><ul><li>TRANS-BORDER TRANSACTIONS </li></ul><ul><li>Foreign Exchange Management Act </li></ul><ul><li>LISTED COMPANIES </li></ul><ul><li>SEBI Regulations </li></ul><ul><li>Stock Exchange – Listing Agreement </li></ul>
    39. 40. <ul><li>Sec 391 – 394 of Indian companies act covers M & A. </li></ul><ul><li>Examination of object clause </li></ul><ul><li>Approval from the board </li></ul><ul><li>Intimation to share holders and creditors. </li></ul><ul><li>Approval from share holders and creditors.- 75% of SH and creditors to approve. </li></ul><ul><li>Application to National Company Law Tribunal (NCLJ) </li></ul><ul><li>Intimation to SEs </li></ul>
    40. 41. <ul><li>Pettion to NCLT for approval </li></ul><ul><li>Filing order with ROC </li></ul><ul><li>Transfer of assets and Liabilities </li></ul><ul><li>Issuance of shares/cash </li></ul>
    41. 43. THE DEAL
    42. 44. <ul><li>Sep 20, 06 : CORUS uses the strategy to work with low cost producer. </li></ul><ul><li>Oct 06, 06 : Initial offer by TATA is considered to be too low. </li></ul><ul><li>Oct 17, 06: TATA kept its offer to 455 pence per share. </li></ul><ul><li>Oct 20, 06 : CORUS accepts the offer of £4.3 billion. </li></ul><ul><li>Oct 23, 06 : Brazilian Steel Group CSN counter-offer to TATA’s offer. </li></ul><ul><li>Oct 27, 06 : CORUS criticized by JCB for acceptance of TATA’s offer. </li></ul><ul><li>Nov 18, 06 : The CSN approaches Corus With an offer of 475 pence per share </li></ul><ul><li>Nov 27, 06 : Board of Corus decides to give more time for shareholders to decide whether it issue forward a formal offer. </li></ul><ul><li>Dec h18,06 : Tata increases its original bid for Corus 500 pence per share, then CSN made its counter bid at 515 pence per share in cash </li></ul><ul><li>Jan 31, 07 : Tata ad agreed to offer Corus investors 608 pence per share in cash </li></ul><ul><li>Apr 02, 07 : Tata steel manages to win acquisition to CSN and has the full voting support from Corus shareholders </li></ul>
    43. 45. <ul><li>TATA Acquired CORUS on 2 nd April 2007 which is 4 times larger than its size. </li></ul><ul><li>The deal price was $ 12 Billion. </li></ul><ul><li>TATA Steel,the winner of the auction for CORUS declares a bid of 608 Pence per share. </li></ul><ul><li>In 2005 when the deal was started the price per share was 455 pence. </li></ul><ul><li>TATA Surpassed the final bid from Brazilian steel maker ‘COMPANHIA SIDERURGICA NACIONAL’ (CSN) of 603 pence per share. </li></ul><ul><li>The combined entity has become the world’s fifth largest steelmaker after the deal. </li></ul><ul><li>For this deal TATA has finance only 4 Billion $ from internal company resources. </li></ul><ul><li>TATA Have secured funding commitments from its advisors. </li></ul><ul><li>These advisors were Deutshe bank, ABN Amro and Standard Chartered. </li></ul>
    44. 46. <ul><li>The initial motive behind the deal was not CORUS revenue size but rather its market value. </li></ul><ul><li>To compete on global scale because then TATA was just at 56 th rank in steel production. </li></ul><ul><li>CORUS holds a number of Patents and R & D facility. </li></ul><ul><li>Acquiring Corus will give Tata access to European customers of steel. </li></ul><ul><li>Acquisition cost will be lower then setting up new green field plants and marketing channel. </li></ul>FOR TATA
    45. 47. <ul><li>To extend its Global reach through TATA. </li></ul><ul><li>To get access to Indian Ore reserves, as well as virgin market for steel. </li></ul><ul><li>To get access to low cost materials. </li></ul><ul><li>Total Debt of Corus was GBP 1.6bn </li></ul><ul><li>Saturated market of Europe. </li></ul><ul><li>Better facilities and lower cost of production </li></ul><ul><li>Employee cost was 15 % (TATA- 9%) </li></ul><ul><li>Profit margin was 3.4% (TATA- 17%) </li></ul>FOR CORUS
    46. 48. Major Acquisitions Target Buyer Value ($ bn) Year Arcelor Mittal Steel 31 2006 NKK Corp Kawasaki Steel 14.1 2001 LMM Holdings Ispat Intl 13.3 2004 Corus TATA 12.0 2006 Krupp AG Thyssen 8.0 1997 Dofasco Arcelor 5.2 2005 Intl Steel Mittal Steel 4.8 2005
    47. 49. COMPANY CAPACITY in (million tones) 1.Arcelor-Mittal 2.Nippon steel 3.Posco 4.JEF steel 5.Tata steel- Corus 110.0 32.0 30.5 30.0 27.7
    48. 51. <ul><ul><li>Ford, a leading automaker and one of the largest MNC in the global automobile industry. </li></ul></ul><ul><ul><li>Ford acquired Jaguar from British Leyland Limited in 1989 for US$ 2.5 billion </li></ul></ul><ul><ul><li>Ford bought Land Rover in 2000 for US$ 2.7 billion from BMW </li></ul></ul><ul><ul><li>Over the years, the operations of both Jaguar and Land Rover were fully integrated </li></ul></ul><ul><ul><li>Ford reported losses of US$ 12.7 billion in the year 2006 </li></ul></ul><ul><ul><li>Ford conducted strategic reviews on the two brands and in June 2007 announced that it was considering selling JLR </li></ul></ul><ul><ul><li>Ford was concerned more about the interest of the workers employed with JLR than the price </li></ul></ul><ul><ul><li>JLR’s labour union were against selling to private equity firms to be assure of job security </li></ul></ul><ul><ul><li>On January 03,2008,Ford announced that it had chosen Tata Motors for the JLR deal and had entered into focused negotiations with the company. </li></ul></ul><ul><ul><li>On March 26,2008, Tata Motors agreed to pay US$ 2.3 billion in cash for a 100% acquisition of the businesses of JLR. </li></ul></ul>
    49. 54. <ul><li>Tata Motors raised a bridge loan of US S$ 3 billion through a syndicate of banks </li></ul><ul><li>The loan was raised through Tata Motors UK, a special purpose vehicle and a 100% subsidiary of Tata Motors </li></ul><ul><li>The interest on the bridge loan was linked to LIBOR(London Inter Bank Offer Rate) </li></ul><ul><li>Tata also proposed to raise around US 500 to 600 million through an international issue </li></ul>
    50. 55. <ul><li>Sales of JLR declined by 11.4% during the 2 nd quarter ending Sep.2008 </li></ul><ul><li>Tata motors had to pump in funds to keep JLR on the move </li></ul><ul><li>By the end of Nov.2008,198 employees opted for voluntary retirement and 400 more decide to leave by Jan 2009 </li></ul><ul><li>With not much of cash generation internally, additional investments of funds would only add to the debt and interest burden of the company </li></ul><ul><li>In early Jan 2009,JLR announced 450 jobs cut </li></ul><ul><li>Announced that managers would not receive any bonuses in 2009 while salary raises would be deferred till Oct 2009 </li></ul><ul><li>For the quarter ending Dec2008,the sales volumes of JLR decreased by 35.2% to 49,186 </li></ul><ul><li>Total car sales in the UK in the year 2009 would be at 1.78 million as against 2.4 million in 2008 </li></ul><ul><li>By the end of 2008,retail vehicle sales were reported at 10.8 million-around 2 million lower than the sales reported in 2007 </li></ul><ul><li>Consumers were delaying the purchase of new vehicles due to lack of consumer loans </li></ul>
    51. 57. <ul><li>Biggest merger in the history of Consumer goods </li></ul><ul><li>P&G acquired Gillette for $57b to become the world’s largest consumer goods company </li></ul><ul><li>Annual Sales of the combined entity:$60.7b </li></ul><ul><li>After purchase of Gillette P&G will have $21b brands with market cap of $200b </li></ul><ul><li>P&G paid .975$/share(20% premium),later buyback of shares worth $18-22b over 12-18 months </li></ul>
    52. 58. <ul><li>Merging companies: similarity in Corporate history </li></ul><ul><li>Merger based on a different model where innovation was the focus rather than the scale </li></ul><ul><li>Regulatory concerns: Product overlaps </li></ul><ul><li>Consumer goods after 1980s </li></ul>
    53. 59. <ul><li>P&G strength: Women’s personal care products </li></ul><ul><li>Gillette strength: Men’s grooming category </li></ul><ul><li>Complementary in strength cultures and vision to create potential for superior sustainable growth </li></ul><ul><li>Gillette stock climbed 50% since 2003,profits jumped on premium products </li></ul><ul><li>Acquisition added about 20% to P&G sales, long term sales growth estimate to 5-7% a year </li></ul><ul><li>Operating margin expected to grow by 25 % by 2015 from 19% in 2003 </li></ul><ul><li>The companies expected cost savings of $14-16 bn from combining back-room operations and new growth opportunities. </li></ul>
    54. 60. <ul><li>more resources to enable intensive collaborative supply chain initiatives in a more cost-effective way. </li></ul><ul><li>merger would also bring down the advertising and media costs owing to greater bargaining power </li></ul><ul><li>Opportunities in developing markets: Gillette would give exposure to P&G in emerging economies like India and Brazil, while P&G would distribute Gillette products in China </li></ul><ul><li>It will give P&G the much needed boost to further strengthen its product categories where at present it has negligible presence </li></ul><ul><li>The deal will help Gillette in improving its inventory days. </li></ul>
    55. 61. <ul><li>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.  </li></ul><ul><li>Cultural problems absence because of geographical proximity </li></ul><ul><li>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 </li></ul><ul><li>P&G's ability to handle this massive cultural assimilation would decide the success or failure of this acquisition. </li></ul><ul><li>Overlaps of some brands </li></ul>
    56. 62. <ul><li>Pressure for competitors in the industry </li></ul><ul><li>competitors could launch new products or strengthen their supply chain relationships during this time to gain an edge </li></ul><ul><li>P&G-Gillette combination could be a transformative deal for the industry because of Gillette's growth potential. Analyst forecasted that this deal could lead to further consolidation in the industry </li></ul>