Students looking for free, top-notch essay and term paper samples on various topics. Mercury Athletic. Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. Internal rate of return or IRR is the interest rate at which the net present value of all the cash flows from a project or investment equal zero. Liedtke believes the acquisition would help nearly double Active Gear’s revenue, and is confident that West Coast Fashions will be approaching Active Gear soon with an offer. When students have the English-language PDF of this Brief Case in a coursepack, they will also have the option to purchase an audio version. Liedtke thought acquiring Mercury would roughly double AG’s revenue, increase its leverage with contract manufacturers and expand its presence with key retailers and distributors. First, acquiring Mercury could improve both companies financially. West Coast Fashions, Inc. (WCF), a large designer and marketer of men’s and women’s branded apparel recently announced plans for a strategic reorganization. Please join StudyMode to read the full document. Case Study Analysis Solutions Mercury Athletic Footwear: Valuing the Opportunity Case Solution The industry is same, products are similar, markets are similar, greater ability to merge each other’s operating efficiencies and improve deficiencies, therefore it is evident that these factors confirm that Mercury is the best target for acquisition. Companies can reduce risk factors by not following fashion trends which equates to efficient and effective inventory management and missed profit opportunities. In order to provide a solid recommendation to Liedtke, further analysis must be performed. Referencing the tables below: Synergies are excluded from financial analysis Casting a shadow over these numbers are AG’s typical competitors. AGI can solve these problems by merging with Mercury Athletic. Do you regard the value you obtained as conservative or aggressive? The market is influenced by fashion trends, price, quality and style. Some of the essential factors that we focus on while developing Case Study Solution content are: d. Estimation value of Mercury based on estimates from (a) to (c) 6 Mercury Athletic: Valuing the Opportunity is a Harvard Business (HBR) Case Study on Finance & Accounting , Fern Fort University provides HBR case study assignment help for just $11. John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. 1. Mercury has some characteristics that should be considered: Mercury, is a footwear company that aim at urban and youth market, one of the most lucrative customer target in the industry. It has annual revenues of $470.3M (42% of revenues came from athletic shoes), and $60.4M of operating... ... Quantitative Analysis ...There are several reasons why AGI should consider Mercury Athletic as an appropriate target for acquisition. (WCF), a large designer and marketer of men’s and women’s branded apparel had recently This reflects a good acquisition opportunity. c. Estimation for long-term growth rate and estimate the terminal value 5 This is because Mercury and AGI both are the footwear industry. West Coast Fashions, Inc. (WCF), a large designer and marketer of men’s and women’s branded apparel recently announced plans for a strategic reorganization. West Coast Fashions, Inc. (WCF), a large designer and marketer of men’s and women’s branded apparel recently announced plans for a strategic reorganization. 4 March, 2015 Acquiring MA will double AG’s annual revenue. Mercury Athletic Case. Dec. 15, 2020. There are four main reasons supporting this acquisition. In March 2007, John Liedtke, the head of business development for Active Gear, Inc., a privately Mercury Athletic Footwear: Valuing the Opportunity 4 5. Four main segments: men’s and women’s athletic and casual footwear. Liedtke thought acquiring Mercury would roughly double AG’s revenue, increase its leverage with contract manufacturers and expand its presence with key retailers and distributors. Mercury Background 2003 - acquired by West Coast Fashions (WCF) Attempted brand extension through apparel line Business stalled Mercury CEO eager to return exclusively to footwear Four footwear product lines Men’s/Women’s athletic Men’s/Women’s casual 2006: Revenue - $431.1 million EBITDA - $51.8 million Target customers are urban and suburban family members aged 25 to 45. Active Gear, Inc. is a privately held footwear company with $470.3 million in revenue in 2006, making it relatively small compared to big players in the athletic and casual footwear industry. Mercury Athletic Footwear As shown in the table below, Mercury dropped... ... AG’s typical competitor has annual sales over $1.0B. Let me walk you through some qualitative considerations before making my recommendation. Declining revenue growth. Mercury Potential to double revenues Increase leverage with manufacturers Increase long run growth rate Expand presence with key retailers and distributors. Despite the industry’s overall stability, the performance of... StudyMode - Premium and Free Essays, Term Papers & Book Notes. Additional materials, such as the best quotations, synonyms and word definitions to make your writing easier are Executive Summary & Overview of Problems 3 Acquiring Mercury would double AGI’s revenue. Why or why not? This could have attributed to the various profitability problems that plagued Mercury. If you are not following the correct format for writing a Case Study Solution, then it becomes quite risky and profoundly affects your status. Due to a strategic reorganisation. Mercury Athletic Case . Contents Second, by increasing the size of the AGI they would realize certain supply chain benefits. Mercury Athletic Footwear Case study September 10, 2017 ~ AssignmentHelpCenter ~ Leave a comment Mercury Athletic Footwear: Valuing the Opportunity In March 2007, John Liedtke, the head of business development for Active Gear, Inc., a privately held footwear company, was contemplating an acquisition opportunity. The plan called for a divestiture of certain non-core leverage with contract manufacturers, and expand its presence with key retailers and distributors. Athletic and Casual Footwear Industry MA had revenues of $431.1M and an EBITDA of $51.8M Mercury Athletic Footwear – Acquisition Analysis. 839 Words 4 Pages. Active Gear, Inc. (AGI) is a privately held footwear company and is contemplating the possibility of acquiring Mercury Athletic Footwear. Northwood University DEVOS Program Finally, acquainting Mercury is ease of integration. View case1 from FVS 101 at University of Veterinary & Animal Sciences, Lahore. Harvard Business Case Studies Solutions - Assignment Help. 2. Terran Knox Analysis on Mercury acquisition 4 Retrieved from http://studymoose.com/mercury-athletic-case-essay, Copying content is not allowed on this website, Ask a professional writer to help you with your text, Give us your email and we'll send you the essay you need, Please indicate where to send you the sample. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. How would you analyze possible synergies or other sources of value not reflected in Liedtke’s base assumption? Market Overview Mercury Athletic Footwear: Valuing Opportunity Case Summary: John Liedtke, head of business development for Active Gear Inc. (AGI), is evaluating the acquisition of Mercury Athletic (Luehrman & Hielprin, 2009). Mercury has a high growth rate of revenue, which may compensate for the low growth rate of revenue for AGI. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. While Mercury Athletics was an owned subsidiary of WCF, they were allowed to operate with a rather large amount of autonomy. Valuing the Opportunity In January 2007, West Coast Fashions, Inc, a large designer and marketer of branded apparel, announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, Mercury Athletic. In order to analyze possible synergies, I would look at both companies’ operations. Measurements II MBA-634 The negative rate could signify that in 2007 they are projecting to discontinue a product line. Though there are a number of reasons why this could be occurring, one option may be that the company is struggling to increase market share. Presented to: Professor Kevin Wall Eyeing an opportunity for growth via a bolt-on acquisition, John Liedtke, head of business development for the company, is looking into acquiring a subdivision of West Cost Fashions, Inc., Mercury Athletic. One of the divisions WCF intended to shed was Mercury Athletic, its footwear division. Before acquiring Mercury Athletic Footwear, Liedtke wants a complete evaluation of the opportunity. Estimation the value of Mercury based on discounted cash flows and Liedtke’s base case projections. Mercury Athletic Footwear Question 1 Based on the information in the case study, calculate the value of Mercury Athletic Footwear as an independent firm at the time of the case study … Over the years, the firm’s athletic shoes had evolved from high-performance footwear to athletic fashion wear with a classic image. How would you recommend modifying them? held footwear company, was contemplating an acquisition opportunity. This business model led to more efficient and effective supply chain and operating management. AG is a relatively small athletic and casual footwear company. Fiore was forced to sell the company after running it for over 35 old ages. In January 2007, West Coast Fashions, Inc., a large designer and marketer of branded apparel, announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, Mercury Athletic. Mercury Athletic Footwear: Valuing the Opportunity Case Study Team members: Xingru Deng Zhiqiang Qing Ke Ma Ying AG’s initial focus was to produce and market high-quality specialty shoes for golf and tennis players. Is Mercury an appropriate target for AG? Liedtke believes that acquiring Mercury Athletic Footwear would double AGI’s revenue, increase its leverage with contract manufactures, and expand AGI’s presence in relators and distributers. Your Answer is very helpful for Us Thank you a lot! Nicholas Thebeau, Student ID 50927830 3. This acquisition would double AGI’s revenues, increase its leverage with contract manufacturers, and also help to expand its presence with key retailers and distributors. With 2006 revenue of $431.1 million, Mercury Athletic represents a similar market share in the mature, highly competitive industry. To begin the analysis, we examine both companies’ historical financial data to get a better idea of their respective financial health. Overview They maintained their own financial statements, databases, resource management systems, and distribution facilities (Luehrman & Heilprin, 2009). In this case, the cashinflow is the acquisition price, which used to purchase the Mercury Corporation. Great pressure from suppliers and competitors caused some deterioration of basic performance for AGI during 2004–2006. Women’s casual footwear is Mercury’s worst performing product and post-acquisition the line may be discontinued by Active Gear. Active Gear The firm’s traditional casual shoes also offered classic styling, but were aimed at a broader, more mainstream market. ui. Mercury Athletic was purchased by WCF from its laminitis Daniel Fiore. Mercury Athletic. In order to emphasizing individual products, it began to monitor styles and images from global culture Valuing Mercury Athletic To perform a preliminary valuation, Liedtke developed a base case set of financial projections based on forecasts of revenue and operating income for each of Mercury’s four main segments as shown in Exhibit 6. Don't be confused, we're about to change the rest of it. the program called for the divestiture of MA and other “non-core” WCF assets. -Founded in 1968 by Daniel Fiore -Producer, designer and distributor of branded athletic and An Overview of the Problem John Liedtke, the head of business development for Active Gear, Inc. wanted to acquire Mercury Athletic, footwear division of WCF. Synergy Effects of the Acquisition 6 With fewer and bigger Chinese manufacturers, larger shoe sellers would have an advantage. We've changed a part of the website. Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. announced plans for a strategic reorganization. It had two product lines- athletic and casual footwear 1. Quantitative Analysis Active Gear had recently increased its supplier concentration to improve its negotiating position because AGI’s small size … n. As. Acquiring MA- AG would be less affected by the Chinese manufacturing contract consolidation, due to increased buying powers. AG’s target demographic was urban and suburbanites, ranging from 25-45 in age. Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. Starting from where they source their materials to distributing their final product are all possibilities of operational synergies (buying power, distribution channels, inventory management, etc…). By roughly doubling the volume after the proposed acquisition, AGI would be in a better negotiating position. Unfortunately, their profitability has been disappointing due to price concessions to big box retailers and an unsuccessful women’s line. Why? However, because they opted for the safe route it halted the company’s sales and growth opportunity. Products were distributed to departmental and discount stores West Coast Fashions Inc., a large designer and marketer of men’s and women’s branded apparel recently announced that it plans to shed its Mercury Athletic Footwear subsidiary. 2. Review the projections by Liedtke. bid for Mercury; consequently, he wanted to complete his own rough evaluation of the opportunity Acquiring MA could lead to economies of scale and scope through manufacturing and distribution networks, respectively. Companies can reduce risk factors by not following fashion trends which equates to efficient and effective inventory management and missed profit opportunities. Get a verified writer to help you with Mercury Athletic Case. Goldman Sachs Case Competition. Secondly, acquiring Mercury is a lower risk way for AGI to increase their growth rate. Synergies within supply chain, operations, research and development, and advertising should all improve Mercury’s EBITDA. The subsidiary that Liedtke and AG intended to acquire was Mercury Athletic (MA), a footwear company. First of all, this acquisition would not be costly since AGI and Mercury share several similar characteristics in footwear industry. Mercury Athletic Footwear: Valuing the Opportunity Case Solution While considering whether or not Mercury is an appropriate target for the Active Gear Incorporated AGI, different qualitative aspects need to … Mercury Athletic was purchased by WCF from its founder Daniel Fiore. AG was among the first companies to offer fashionable, walking, hiking and boating footwear. Are they appropriate? Due to a strategic reorganization, the plan called for the divestiture of MA and other “non-core” WCF assets. The Business plan on Mercury Athletic Case. It has annual revenues of $470.3M (42% of revenues came from athletic shoes), and $60.4M of operating income. By continuing we’ll assume you’re on board with our cookie policy. Mercury Athletic Footwear. Mercury Athletic Footwear: Valuing the Opportunity Active Gear, Inc. (AGI) is a privately held footwear company and is contemplating the possibility of acquiring Mercury Athletic Footwear. Blog. John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. It is reasonable to say that Liedtke’s projections properly reflect AG’s business model, post-acquisition. 4. Mercury Athletic: Valuing the Opportunity Case Study Solution. Case Solution For Mercury Athletic: Valuing the Opportunity by Timothy A. Luehrman, Joel L. Heilprin (Harvard Business School Case Study) Case Studies Solutions and Analysis for Harvard Business School ... announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, Mercury Athletic. And the main products... ...2009 AG and MA are both competing in the athletic and casual footwear industry. Executive Summary John Liedtke, the head of business development for Active Gear, Inc., (AGI) looked to acquire Mercury from WCF, believing that the purchase would double their revenue and provide greater leverage with manufacturers and distributors. Mercury Athletic was purchased by WCF from its founder Daniel Fiore. The apparel or footwear industry is highly competitive with low growth. Year to year growth rates are extremely volatile, normalizing in 2010. Although Mercury’s financial performance has been disappointing, they experienced top line growth of 20% in 2006. b. Estimation of the free cash flows from 2007 to 2011 5 Boosta Ltd - 10 Kyriakou Matsi, Liliana building, office 203, 1082, Nicosia, Cyprus. A main contributor to these problems was that the company has to discount many of its lines to be allowed to be sold in large discount retailers. Company culture matching could also become problematic. Fiore was forced to sell the company after running it for over 35 years, due to health problems. Net present value of future cash flows equates to a positive $0.2M. Problem Statement Financial Analysis Br. Shoes popularity grew in the extreme sports market Referencing the Free Cash Flow and Terminal Value tables (found below), I will be able to generate an opinion of Liedtke’s projections. MA developed an operating infrastructure, allowing management to quickly adapt to changes in customer tastes with product specifications. The market is influenced by fashion trends, price, quality and style. AG excluded big box retailers and discount stores. Mercury Athletic Footwear Case Study John Liedtke head of Active Gear, Inc. (AGI) is contemplating whether to invest in Mercury Athletic a subsidiary of West Coast Fashions (WCF). ... Age Discrimination In The Workplace Case Study. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. Further, since the women’s casual line is going to be closed or consolidated, the rest of the three segments of Mercury show prosperous future prediction in margins and growth. The subsidiary that Liedtke and AG intended to acquire was Mercury Athletic (MA), a footwear company. a. Estimation of the weighted average cost of capital 5 Liedtke knew that acquiring Mercury would roughly double Active Gear’s revenue, increase its also offered here. Athletic shoes developed from high-performance footwear to athletic fashion wear. AG and MA target demographics could not produce company synergies MA is fashion trendy, therefore prone to risks outside of AG’s steady business model Company cultures could not match. businesses. Second, this combination would expand firm size and help AGI achieve good bargains with... ... Thisprice per earnings ratio is used because it is the closest number that can match the marketview of Mercury Athletic. EBIT has been projected to gradually increase, which looks to be on par with industry norms. Just give us some more time, By clicking Send Me The Sample you agree on the, Mercury Athletic Footwear: Valuing the Opportunity, Self Medication Practices in a Rural Filipino Community. AGI’s head of business development, John Liedtke, believes acquiring Mercury Athletic Footwear is a good option for the company. AGI is a profitable company; however, its size is not large enough to cater for market expansion opportunities. Because of Chinese manufacturing contract consolidations, AG’s size was becoming a disadvantage due to low buying power vs. competitors. In order to find if the projections are reasonable, you need a starting point. before hearing the bankers’ pitch. Presently, AGI is much smaller than its competitors, and that is putting them at a competitive disadvantage from a supply chain standpoint. 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