The Best Deal Gillette Could Get? Procter and ; Gamble’s Acquisition of Gillette Harvard Case Solution & Analysis

The Best Deal Gillette Could Get? Procter and ; Gamble’s Acquisition of Gillette Case Study Solution

Benefits of All Cash Acquisition:

There are the two benefits of all cash acquisition:

1. First is the efficiency in the stock portfolio of the investors that provide the benefits to the investors to invest in more profitable company’s shares after receiving the money against the holdings of The Gillette Company Shares.
2. Second is the immediate realization of capital gain upon the shares of The Gillette Company.

Disadvantages of All Cash Acquisition:

There are the three disadvantages of all cash acquisitions:

1. Investors will pay the tax upon the realization of capital gains upon the shares of The Gillette Company.
2. The acquiring company will use its cash reserves to purchase the target company’s shares will lead towards the liquidation.
3. The acquiring company took the debt to purchase the target company’s shares will lead towards the down ratings of its bonds and stocks.

Benefits of All Stock Acquisition:

There are the two benefits of all stock acquisition:

1. First is that, investors will not pay any taxes upon the realization of capital gains.
2. Second is that, all stock acquisition will not impact the company’s leverage overall.

Disadvantages of All Stock Acquisition:

There are the two disadvantages of all stock acquisitions:

1. Investors cannot calculate its capital gain as it is not realized yet.
2. Shareholders of acquiring company will face the dilution in power as the number of shares will increase for acquiring company.

Alternative 1:

After evaluating all the scenario for this acquisition, there is an option that is to not go for the acquisition to avoid the problem that both companies are facing after the announcement of acquisition of The Gillette Company from Procter and Gamble which is lead to the some criticism from the media and shareholders regarding the terms and considerations of this acquisition. Here, the media arise the question against this acquisition either it is beneficial for shareholders of both companies or the CEO of target company (The Gillette Company) James Kilts are making his own wealth from this acquisition.

Alternative 2:

After evaluating all the scenario for this acquisition, there is an option to go for the acquisition by removing the problem that the both companies are facing after the announcement of acquisition of The Gillette Company from Procter and Gamble which is leading to some criticism from the media and shareholders regarding the terms and considerations of this acquisition. Here, the media arise the question against this acquisition either it is beneficial for shareholders of both companies or the CEO of target company (The Gillette Company) James Kilts are making his own wealth from this acquisition.

Recommendation:

It is recommended that the companies should go for the acquisition by encountering the questions that media has raised. There are two valuable justifications that will provide the evidences against the criticism that it is not made for the shareholders benefits but for the James Kilts benefits. These two justifications are described below.

1. The current market stock price of the Gillette Company’s shares is 45 dollars when the Procter and Gamble are offering them the share price with 20 percent premium price that are providing the evidence that this acquisition is wholly and solely made for the shareholders benefits not for the company’s CEO James Kilts benefits.
2. The acquiring company Procter and Gamble, offering the total benefits to the CEO of The Gillette Company James Kilts around 164 million dollars to avoid the duplication of the same position in the company. This is very small amount for James Kilts as it has been made its wealth around 20 billion dollars after making the CEO of “The Gillette Company” in 2001. This is clearly providing an evidence that this acquisition is wholly and solely made for the shareholders benefits not for the company’s CEO James Kilts benefits..............

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