The Procter & Gamble (P&G)-Gillette Merger

Both the companies expected the merger to bring tremendous synergies. According to Lafley, "This combination of two best-in-class companies creates a stronger brand portfolio, opportunities for even more innovation, faster sales growth, and cost savings." Analysts felt that both scale and focus were important in this industry and P&G had attempted to gain both with this acquisition.

In the words of Lafley, "P&G and Gillette can grow together at levels that neither could sustain on its own. The reason is that consumer products is, in the end, a scale business. The more scale a company can create, the more opportunities there are to grow margins and invest in brand innovation."...

Some analysts felt that the P&G-Gillette merger was a defensive move by P&G to check the growing power of retailers. "Retail had long been a struggle for power between vendors and retailers and lately retailers have had the upper hand," said Robert Spector, a retail historian based in Seattle. He added, "Trying to raise prices and improve margins is very, very hard because of the Wal-Mart effect. This deal is about size versus size." However, other analysts disagreed, saying it was an aggressive move for achieving growth rather than a balancing act. In the words of Jason Gere of A.G. Edwards', a brokerage firm,