Chap001_Day1_class

Chap001_Day1_class - Chapter 1 Part I Business Combination...

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Chapter 1 Part I Business Combination Overview Case 1-4 ± Why do firms acquire other firms? ± Should the tax law encourage mergers? ± Should the FASB encourage mergers? 1
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Procter & Gamble and Gillette On Janurary 28, 2005, in its largest acquisition to date, Procter & Gamble announced an agreement to purchase 100 percent of Gillette Company in a transaction valued at approximately $57 billion . Both P&G and Gillette manufacture and distribute a wide variety of consumer y products including many personal care, home cleaning, and good products. Prior to the deal, Gillette and P&G operated more than 30 and 80 countries respectively P&G has in more than 30 and 80 countries, respectively. P&G has expertise in developing, manufacturing, and distributing leadership brands including 16 brands that produce sales of more than $1 billion each. The Gillette acquisition will add five more brands to this category. 2
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Executives at the companies said they believe ey'll both be able to grow faster together than 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 i i P&G d t t tht bringing P&G some product segments that are growing faster than the company's overall current portfolio of products. Executives at the two companies insisted the deal ill also mean new product development for their will also mean new product development for their customers. They said increased scale from the combination should help improve margins, which turn should allow additional investment in in turn should allow additional investment in research and development. 3
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Should the tax law encourage mergers? ± Is merger good for everybody in the onomy? economy? ± Who might be hurt? 4
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P&G and Gillette (-cont’d) Job cuts coming he deal will mean about 6 000 job cuts or The deal will mean about 6,000 job cuts, or about 4 percent of the combined work force of 140,000 employees. It said most of the cuts would come from eliminating management overlaps and consolidation of business support functions. 5 (Source: money.cnn.com)
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New Round of Layoffs on the Horizon as Merger Activity Heats Up (11/24/03) Source: http://www.laborresearch.org/story.php?id=335 Although mass layoffs declined in the third quarter of 2003, a new wave of layoffs is gathering on the horizon as merger and acquisition activity gains strength. According to Challenger, Gray & Christmas, Inc., the merger boom of 1995- 1999 translated into a 12 percent increase in layoffs during that period.
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Chap001_Day1_class - Chapter 1 Part I Business Combination...

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