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January 28, 2005
P&G and Gillette. What Mergers Were Invented For.
P&G buying Gillette. This is one of those deals that makes so much sense , it's scary.
We have a piece in this week's about P&G's strategy to gadget up its profits with products like Swiffer, Febreze Scentstories and Mr. Clean AutoDry. In the story we describe the strategy as following Gillette's razor and blade strategy: sell the consumer a great appliance or gadget and keep them buying the refills. Gillette is in the story too for finally integrating efforts of its Gillette, Oral-B, Braun and Duracell units to produce more and high-margin gadgets like the M3Power razor and Hummingbird flosser.
Now, the two companies will combine efforts and resources on all these fronts, and the strength it will have is hard to miss. This seems like a case of 1+1=5.
It is, of course, in stark contrast to the possible May Department Stores acquisition by Federated Dept. Stores. Yikes. When was the last time either of these companies innovated anything. ANYTHING? Looks more like a case of 1+1= (5) if that deal ever gets done.
IPG vice chairman David Bell told me today that "Mergers created because you have weak entities that you think might be stronger combined are almost never a good idea. Mergers created because you see great growth opportunities are the deals you want to make."
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