Gillette was acquired at a negotiated price of 0.975 per share which had been equated over a premium of 20% (Stimes 99). Moreover, the potential fair value had risen the market price witnessed an immediate jump given the fact that Gillette’s prices were made roughly equal to that of P&G with respect to the current exchange ratio. The marginal utility for P&G had increased with this particular acquisition with regard to having additional units of operations and level of innovation, however, the utility of market development had been reduced in order to satiate cost concerns and Gillette’s existing markets were not developed at the same instance.
Acquisitions are thought to provide cash flows immediately; however such a price is affected by the firm’s ability to have growth potential internally.
It has been concluded that Gillette’s acquisition has been a great move for the company’s shareholder, however, P&G’s position had been undermined to a certain level especially when a year before Gillette’s stock turnover was low and later as an aggregate level both parties turnover was inevitably low. This made it witness a lowering down of the grade level.
However, overall, it turned out to be a deal worth of having $61 billion in sales on an annual basis, but in times of global economic crisis the company faces a number of threats and margin cuts when they remain steadfast to the agreement of not downsizing any employee due to recession.
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