Essay on Mercury Athletic Footwear: Valuing the Opportunity

3866 Words Oct 6th, 2013 16 Pages
4050
SEPTEMBER 18, 2009

TIMOTHY A. LUEHRMAN
JOEL L. HEILPRIN

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. West Coast Fashions, Inc.
(WCF), a large designer and marketer of men’s and women’s branded apparel had recently announced plans for a strategic reorganization. The plan called for a divestiture of certain non-core assets and a renewed focus on WCF’s higher-end business, business-casual, and formal-wear apparel businesses. One of the divisions WCF intended to shed was Mercury Athletic, its footwear division.
Liedtke knew that acquiring Mercury would
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Active Gear (AGI) was founded in 1965 to produce and market high-quality specialty shoes for golf and tennis players. The company’s products were among the first to incorporate sculpted cushioned insoles and a selection of high-performance tread patterns designed for specific surfaces and/or playing conditions. AGI began selling its shoes primarily in golf and tennis pro shops and a few specialty sporting goods stores. As its products became more established, AGI moved into larger department and retail stores. The company also exported its shoes to Europe and, to a lesser extent,
Japan. Sales outside the United States were made through a network of wholesalers, which the company still employed in 2007.
Beginning in the 1970s, Active Gear moved into casual and recreational footwear aimed at what had become its core customer demographic: affluent urban and suburban family members aged 25 to
45. AGI was among the first companies to offer fashionable walking, hiking, and boating footwear.
By the early 1980s, the Active Gear brand and logo were associated with a lifestyle that was prosperous, active, and fashion-conscious.
After years of steady if unspectacular growth, AGI’s 2006 revenue and operating income were
$470.3 million and $60.4 million, respectively, with 42% of revenue from athletic shoes and the balance from casual footwear. [Historical income statements and balance sheets for AGI

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