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A conglomerate merger is a type of merger whereby the two companies that merge with each
other are involved in different sorts of businesses. The importance of the conglomerate mergers
lies in the fact that they help the merging companies to be better than before.
Types of Conglomerate Mergers
There are two main types of conglomerate mergers the pure conglomerate merger and the
mixed conglomerate merger. The pure conglomerate merger is one where the merging
companies are doing businesses that are totally unrelated to each other.
The mixed conglomerate mergers are ones where the companies that are merging with each other
are doing so with the main purpose of gaining access to a wider market and client base or for
expanding the range of products and services that are being provided by them
There are also some other subdivisions of conglomerate mergers like the financial
conglomerates, the concentric companies, and the managerial conglomerates.
Reasons of Conglomerate Mergers
There are several reasons as to why a company may go for a conglomerate merger. Among the
more common reasons are adding share of the market that is owned by the company and
indulging in cross selling. The companies also look to add to their overall synergy and
productivity by adopting the method of conglomerate mergers.
Benefits of Conglomerate Mergers
There are several advantages of the conglomerate mergers. One of the major benefits is that
conglomerate mergers assist the companies to diversify. As a result of conglomerate mergers the
merging companies can also bring down the levels of their exposure to risks.
Implications of Conglomerate Mergers
There are several implications of conglomerate mergers. It has often been seen that companies
are going for conglomerate mergers in order to increase their sizes. However, this also, at times,
has adverse effects on the functioning of the new company. It has normally been observed that
these companies are not able to perform like they used to before the merger took place.
It has normally been seen that a lot of companies that go for conglomerate mergers are able to
manage a wide variety of activities in a particular market. For example, these companies can
carry out research activities and applied engineering processes. They are also able to add to their
production as well as strengthen the marketing area that ensures better profitability.

The merger between P&G and Gillette happened during the year 2005. The merger
created one of the worlds biggest consumer goods producers with a combined turnover of
roughly 50 Billion. The deal would give the combined company even more control over shelf
space at the nation's retailers and grocers. Procter & Gamble will pay 0.975 share of its common
stock for each share of Gillette common stock as a part of the deal. Executives at the companies
said they believe they'll both be able to grow faster together than separately, with P&G opening
doors for Gillette in markets such as China and Japan while Gillette bringing P&G some product
segments that are growing faster than the company's overall current portfolio of products.
Because of expectations from the deal, P&G raised the annual revenue growth outlook to 5 to 7
percent, rather than its earlier target of 4 to 6 percent.
Procter & Gamble
Procter & Gamble Co., also known as P&G, is an American multinational consumer
goods company headquartered in downtown Cincinnati, Ohio, United States, founded by
William Procter and James Gamble, both from the United
Kingdom. Its products include pet foods, cleaning agents,
and personal care products.
The company moved into other countries, both in
terms of manufacturing and product sales. Numerous new
products and brand names were introduced over time, and
Procter & Gamble began branching out into new areas.
The company introduced Tide laundry detergent in 1946
and Prell shampoo in 1947. In 1955, Procter & Gamble
began selling the first toothpaste to contain fluoride,
known as Crest. Branching out once again in 1957, the company purchased Charmin Paper Mills
and began manufacturing toilet paper and other paper products. Once again focusing on laundry,
Procter & Gamble began making Downy fabric softener in 1960 and Bounce fabric softener
sheets in 1972. One of the most revolutionary products to come out on the market was the
company's Pampers, first test-marketed in 1961. Prior to this point, disposable diapers were not
popular, although Johnson & Johnson had developed a product called Chux. Babies always wore
cloth diapers, which were leaky and labor-intensive to wash. Pampers provided a convenient
alternative, albeit at the environmental cost of more waste requiring landfilling.
Procter & Gamble acquired a number of other companies that diversified its product line
and significantly increased profits. These acquisitions included Folgers Coffee, Norwich Eaton
Pharmaceuticals (the makers of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shulton's
Old Spice, Max Factor, and the Iams Company, among others.

Gillette Company
The Gillette Company is the world leader in the men's grooming product category as well
as in certain women's grooming products. It was established by King Gillette on 1901. Although
more than half of company profits are still derived from shaving equipment--the area in which
the company started--Gillette has also attained the top spots worldwide in writing instruments
(Paper Mate, Parker, and Waterman brands) and correction products (Liquid Paper),
toothbrushes and other oral care products (Oral-B), and alkaline batteries (Duracell products,
which generate almost one-fourth of company profits). Gillette maintains 64 manufacturing
facilities in 27 countries, and its products are sold in more than 200 countries and territories, with
more than 60 percent of sales occurring outside the United States.
In 1904 Gillette received a patent on the safety
razor; sales rose to 90,884 razors and 123,648 blades
that year. The following year the company bought a
six-story building in South Boston. By 1906 the
company had paid its first cash dividend. During the
years before World War I Gillette steadily increased
earnings through print advertisements, emphasizing
that with his razor men could shave themselves under any conditions without cutting or irritation.
Gillette eventually developed new product-delivery systems to replace aerosol cans, such as
nonaerosol pumps and roll-ons, for Gillette's already-established product line, and he put
advertising dollars behind the products, which included Right Guard and Soft & Dri deodorants
and Adorn and White Rain hair sprays. He also started development of a new deodorant product,
Dry Idea, which feels dry when applied. Dry Idea was launched in 1978 after two years of
development at a cost of $118 million. It quickly recovered a quarter of the deodorant market for

The merger
Before the merger occurred, Procter & Gamble was largely absent from the men's
personal care market, a sector led by Gillette. Both companies have different market share,
though the fact that its products were complimentary made the merger created one of the worlds
biggest consumer product companies. The merger happened between the two companies was
considered a mixed conglomerate merger.
The merger was completed on October 1, 2005. Procter & Gamble became the surviving
company, while Gillette Company ceased its individual standing in the market.

Reasons to merge
P&G anticipated increase in profits in line with the increase of the products offered by it.
The combined company was expected to have annual sales of $60 billion. It would own
21 brands of Gillette Company which has sales of more than $1 billion.
The merger will make it easier for managers to segment the market. After the merger,
they will be able to position the brands more cleanly toward distinct segments.
P&G will reap the benefits of synergy- ability to accelerate innovation by transferring
knowledge and technologies across a broader range of products.
P&Gs new size will also give it additional power in negotiating advertising contracts.
Because both companies are struggling with slow growth in the consumer products
industry, international expansion is another driver of the merger. P&G has 106 plants in
41 countries and Gillette has 31 plants in 14 nations. The combined company will
generate between $17 billion and $18 billion in sales, or about 20% of total revenue, from
developing markets.
P&G/Gillette merger could put additional pressure on other consumer products firms,
such as Unilever, Nestle, Kimberly-Clark and Colgate-Palmolive, thus, making it more
powerful than before.
I mplications of the merger
Issuance of 962 million shares of The Procter & Gamble Company common stock and 79
million stock options in exchange for Gillettes outstanding stock options to support the
Divestment of certain overlapping businesses (Spinbrush toothbrush business, Rembrandt
(a Gillette oral care product line), Right Guard and other Gillette deodorant brands)
Involvement of 5500 job cuts. Though this would reap $14 billion cost savings, P&G has
still incurred exit costs of $1.2 billion, including $854 in separation costs related to
approximately 5,500 people, $55 in employee relocation costs and $320 in other exit
costs. These costs are primarily related to the elimination of selling, general and
administrative overlap between the two companies in areas like Global Business
Services, corporate staff and go-to-market support, as well as redundant manufacturing
P&Gs stock has lagged behind its key competitors.
The recession knocked Gillettes core business- razors and blades
Some veterans of P&G looked down on the marketing skill set of incoming Gillette
people and were resistant to new ideas.