The acquisition of razor startup Harry’s fell apart this week after a government agency sued to block the $1.4 billion sale to conglomerate Edgewell.
The Federal Trade Commission argued that the buyout would have removed one of the most successful challengers in an already consolidated market.
There’s an argument being made that Proctor & Gamble, the razor market’s champion, had a role in the deal falling apart. A source familiar with the Harry’s acquisition said when Proctor & Gamble bought a different shaving startup earlier this year, it forced regulators to step in and mitigate.
Proctor & Gamble did not immediately respond to a request for comment.
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Harry’s, a razor startup, may have lost its buyer because of a government move to kill the $1.4 billion sale to a competitor.
But there’s some speculation that Harry’s bigger rival, Procter & Gamble, shares responsibility for the deal falling apart.
The Federal Trade Commission in February sued to block Schick owner Edgewell’s acquisition of Harry’s on antitrust grounds, arguing that the sale would neutralize one of the most successful challengers in a market that’s already highly concentrated. Proctor & Gamble’s Gillette had enjoyed a monopoly on razor sales — until the arrival of disruptors like Dollar Shave Club and Harry’s caused its market share to tumble from 70% a decade ago to about 50%.
One person with direct knowledge of the Harry’s acquisition talks said that when Procter & Gamble bought a different shaving startup in January, the deal “built a narrative” around consolidation in the wet shave razor market. The result forced regulators to step in and stop the Harry’s sale. (Procter & Gamble’s more recent acquisition is still pending approval.)
The source, whose identity we confirmed, described Procter & Gamble’s acquisition as corporate “jiu-jitsu to try to force the issue.” The startup it bought, Billie, makes razors for women and competes with its own female-focused razor brand Joy.
“The Billie thing was pretty clearly an attempt to have its cake and eat it, too,” this person said of Procter & Gamble’s move. “They get to acquire a young competitor … or they get to block us.”
The source requested anonymity because he was not authorized to speak publicly about the acquisition talks at Harry’s.
It’s not unusual for a firm to react to an acquisition by a competitor by making a similar transaction, in order to match a rival’s gains. The potential to squash the competitor’s deal through a government intervention is “just icing on the cake,” according to one antitrust specialist.
“I would not be surprised if that was part of the calculus,” said an attorney who practices antitrust law at a leading firm, who requested anonymity. “I can tell you when you’re thinking about the chess game with your competitors, and you’re thinking about what the FTC is going to do in your deal, you’re also thinking about other M&A deals out there. If I’m Procter & Gamble, I am laser-focused on the deal that Schick announced with Harrys.”
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Source:: Business Insider – Tech