Flow of Presentation

Objective. History. Reasons for Merger; a) Strategic Analyses b) Technical Analyses Valuation. Funding Current Scenario Conclusion.

Objective

Learning Process of M&A.Know how to do valuation.How to make profit my learning

M&A.

Overview of companies

Cincinnati Based Established in yr.1837 Work force : 110,000 Market Capitalization :$141

bill. Suppliers : 85000 Manufacturing plants : 106

in 41 countries. Pre-acquisition revenues

(2004) : $51 bill.

Boston based Established in yr. 1895 Work force : 29400 Market capitalization : $45

billion. Suppliers : 26000 Manufacturing plants : 31

in 14 countries. Pre-acquisition revenues

(2004) : $9.8 bill.

Strategic Analysis

Marketing Approach Global Regional

Culture Innovative Social -Responsibility

+

+

Synergy

Economy of Scale

P&G can havebenefits from theGillette R&Dstructure and use itsBrand Loyalty

P&G can have benefits if they adopt an HYBRID STRUCTURE ; But every change require some cost and they have to do INTEGRATION EFFORT.

Risk in Merger :

Technical Analysis

Sales & Growth RatioProfit MarginLeverageConclusion.

Sale

Sale Growth Rate

Operating Profit Margin.

Debt to Equity Ratio.

Assumption about sale's growth

 % of net

sale2004

sales' growth in 2005

Weightage growth

% of projected sales 2005

sales' growth after 2005

Weightage sales' growth

Blades & Razor

41.32% 14.00% 5.78% 41.15% 12.00% 4.94%

Duracell 21.30% 9.00% 1.92% 20.28% 10.00% 2.03%

Oral Care 15.17% 25.00% 3.79% 16.57% 25.00% 4.14%

Braun 13.04% 15.00% 1.96% 13.10% 15.00% 1.97%

Personal Care

9.17% 11.00% 1.01% 8.89% 11.00% 0.98%

Total100.00

%  14.46% 100.00%   14.05%

Assumption about EBIT margin

 % PFO2004

PFO‘ growth in 2005

Weightage PFO 's growth

%of projected PFO 2005

PFO'growth after 2005

Weightage PFO ' growth

Blades & Razor

63.68% 30.00% 19.10% 65.97% 30.00% 19.79%

Duracell 19.16% 22.00% 4.22% 18.63% 22.00% 4.10%

Oral Care 9.73% 14.50% 1.41% 8.88% 14.50% 1.29%

Braun 3.71% 10.50% 0.39% 3.27% 10.50% 0.34%

Personal Care

3.72% 10.00% 0.37% 3.26% 10.00% 0.33%

Total 100.00%   25.49% 100.00%   25.84%

Assets to Sale  2004 2003 2002 2001

Operating Working Capital ($mill.) 0.00 170.00 708.00 1333.00

Operating Working Capital as %of sale NA 2.00% 8.00% 16.00%

Net Long term assets 5731.00 5614.00 4968.00 4979.00

Net Long term assets turnover 1.83 1.65 1.70 1.62

Capital expenditures ($mill.) 616.00 408.00 405.00 624.00

Capital expenditures % net sales 6.00% 4.00% 5.00% 8.00%

Valuation

Individual Valuation of Firm

Valuation After Acquisition

Assumption for the Valuation

  2005 After 2005

Sales' Growth Rate 14.86%14.05%

EBIT Margin 25.49%25.85%

Tax Rate 30.00%30.00%

Operating Working Capital to sale 1.00%1.00%

Net Long term Assets to sale 60.00% 60.00%

FCFF Valuation Method.

FCFF = NOPAT + depreciation & amortization

– changes in NWC – Capex

Discount Rate = WACC.

Dream Deal

Total Deal Value : $57 bn Market Cap. : $48bn

@ 18% Premium

.975 P&G Share = 1 Gillette Share

Issued 962mn shares

Issued 79mn stock options

Buyback $22bn of shares

Investment Banker : Goldman Sachs & UBS AG