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Robert A. McDonald of Procter & Gamble discussed the terms of the $57 billion deal to buy Gillette Co. in Cincinnati Friday.
Robert A. McDonald of Procter & Gamble discussed the terms of the $57 billion deal to buy Gillette Co. in Cincinnati Friday. (Getty Images Photo)

Gillette merger opens wounds, possibilities

The blows fell in threes for Boston last week: the third big takeover, for the third straight year, as Gillette Co. became the third big Boston company to line up its executives in business suits, smile for the cameras, then move its corporate headquarters away.

The Gillette acquisition by Procter & Gamble Co. for $57 billion feels like the tipping point for a region buffeted by mergers, sealing its position as an outpost for large companies based elsewhere. Of the 50 biggest Massachusetts companies in the late 1980s, only 13 are now left.

Gillette's merger also opened a psychological wound, as Boston, which once called itself the Hub of the Universe, now finds itself playing second fiddle to cities such as Cincinnati, Charlotte, N.C., and Toronto.

''I feel like we're taking a city and turning it back into a town," said Ralph Dangelmaier, president of the small Newton company P&H Solutions Inc., which provides online technology to banks. ''We prided ourselves on being a leader in the country with large corporations, and now we have to almost re-identify how we think of Boston."

In many ways, the Gillette acquisition is a larger blow than the other megadeals that jolted Boston's economy, several executives and civic leaders said last week. FleetBoston Financial Corp. and John Hancock Financial Services Inc. both worked in the rapidly consolidating financial services industry, where they were the subjects of frequent merger rumors before they finally agreed to be acquired.

Gillette, on the other hand, had remained a solid manufacturing company with deep blue-collar Boston roots and a reputation for global prowess in marketing and product innovation. It made razors and other well-known products that lined people's medicine cabinets and showers.

Its acquisition came without warning, amid strong profits, and it left even some of the state's top business boosters questioning its necessity.

''I wish I had the power to prevent this acquisition from occurring," Mitt Romney, the Republican governor and former venture capitalist, said last week. ''Gillette's a highly successful company. It did not need to merge to maintain its future and to have a bright future."

The Gillette deal, coupled with the Fleet and Hancock mergers before it, may accelerate the end of downtown Boston as a seat of corporate power in the region. Of the 10 biggest public companies left in Massachusetts, only two -- State Street Corp., a financial services firm, and NStar, an electrical utility -- are based in Boston.

And the companies that do remain in Massachusetts are getting smaller: Procter & Gamble, the Cincinnati company that acquired Gillette, generates more annual revenue, $51.4 billion, than all three of Massachusetts' biggest companies combined. The three biggest companies left in Massachusetts are Raytheon Co., a defense contractor, retailer TJX Cos., and office supplier Staples Inc., which have combined revenues of $44.6 billion.

In what could be another blow to Boston, the Gillette deal comes with none of the corporate promises that made the Fleet and Hancock mergers more palatable. Gillette, among Massachusetts' most generous philanthropic donors, made no public vows to sustain the millions of dollars in contributions it gives to the region.

Executives already are talking about thousands of job cuts, which could clean out floors in Boston's equally iconic Prudential building. Gillette gave away about $7 million in 2004, the majority of which went to Massachusetts. A spokesman said it was ''too early" to speculate about giving in the future.

In contrast, when Bank of America acquired Fleet in April, it pledged to maintain the same number of employees in New England and to increase Fleet's charitable giving. Canadian insurer Manulife Financial Corp. also promised to keep Hancock's charitable giving after their merger.

The Gillette deal will not mean the demise of the region's business community, but it will force changes, said Paul Grogan, president of the Boston Foundation, one of the city's largest charitable groups. Boston now will have to look elsewhere for its civic leadership, especially to its hospitals and universities, he said.

''If we continue to be an environment in which there's abundant talent, our universities and healthcare institutions flourish, we'll do very, very well," he said.

The Gillette deal marks the latest in a long line of acquisitions of Boston's most well-known companies, as names such as Jordan Marsh and BankBoston disappeared. The Boston Globe, the city's largest newspaper, is now owned by The New York Times Co.

But some of the region's midsized companies already are making plans to fill that leadership void. Dangelmaier, the Newton technology executive, said his company of about 200 employees has held several internal meetings to discuss ways to be more active in the community. He said he always assumed Boston's big corporate leaders would steer the city in the right direction, but now small and midsized companies will have to step into their place instead.

Other leaders said Boston will be more than up to the challenge. ''We have life sciences growing in our city," Mayor Thomas M. Menino said. ''We have healthcare. We have academia. We're changing our economy."

Still, the loss of Gillette, more than the others, cut to the quick of Boston's identity. The company, founded in 1901, has long been allied with Boston's image of itself: innovative, profitable, and supportive of the arts and culture of the city. Gillette also kept about 1,200 manufacturing jobs in South Boston in an age when New England's other manufacturing dwindled.

For years, Gillette executives were part of a group of influential Boston business leaders called the Vault who met regularly with Boston's mayor and helped direct the city, part of a long tradition of Boston business leaders who felt duty-bound to be active in civic life, said Thomas O'Connor, university historian at Boston College and author of several Boston history books. Most of those leaders and corporations are now gone, he said.

O'Connor worries that this loss of executives and major companies will erode the things that make Boston different from other regions of the country, and it will turn into just another American city.

''What will be left of Boston that we can claim it's the Athens of America anymore?" he asked.

Sasha Talcott can be reached at Robert Burke of the Globe library staff contributed to this report. Material from the State House News Service was used.

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