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 :  Manufacturing plants : 106 in 41 countries.  Pre-acquisition revenues (2004) : $51 bill.  Boston based  Established in yr  Work force :  Market capitalization : $45 billion.  Suppliers :  Manufacturing plants : 31 in 14 countries.  Pre-acquisition revenues (2004) : $9.8 bill.

Strategic Analysis

Marketing Approach Global Regional Culture Innovative Social - Responsib ility + + Synergy Economy of Scale P&G can have benefits from the Gillette R&D structure and use its Brand 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 Ratio  Profit Margin  Leverage  Conclusion.

Sale

Sale Growth Rate

Operating Profit Margin.

Debt to Equity Ratio.

Assumption about sale's growth % of net sale 2004 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% Duracell21.30%9.00%1.92%20.28%10.00%2.03% Oral Care15.17%25.00%3.79%16.57%25.00%4.14% Braun13.04%15.00%1.96%13.10%15.00%1.97% Personal Care 9.17%11.00%1.01%8.89%11.00%0.98% Total % 14.46% % 14.05%

Assumption about EBIT margin % PFO 2004 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 % 25.49% % 25.84%

Assets to Sale Operating Working Capital ($mill.) Operating Working Capital as %of sale NA2.00%8.00%16.00% Net Long term assets Net Long term assets turnover Capital expenditures ($mill.) Capital expenditures % net sales 6.00%4.00%5.00%8.00%

Valuation  Individual Valuation of Firm Individual Valuation of Firm  Valuation After Acquisition Valuation After Acquisition Assumption for the Valuation 2005 After 2005 Sales' Growth Rate14.86% 14.05% EBIT Margin25.49% 25.85% Tax Rate30.00% Operating Working Capital to sale1.00% Net Long term Assets to sale60.00%

FCFF Valuation Method. FCFF = NOPAT + depreciation & amortization – changes in NWC – Capex Discount Rate = WACC.

Dream Deal Total Deal Value : $57 bnMarket Cap. : 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