Mercury Athletic Footwear Essay
Nicholas Thebeau, Student ID 50927830
Presented to: Professor Kevin Wall
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. Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. The subsidiary that Liedtke and AG intended to acquire was Mercury Athletic (MA), a footwear company. 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. In order to …show more content…
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
2. Review the projections by Liedtke. Are they appropriate? How would you recommend modifying them?
In order to find if the projections are reasonable, you need a starting point. Using projected growth rates and EBIT should indicate if Liedtke’s data is solid. Referencing the Free Cash Flow and Terminal Value tables (found below), I will be able to generate an opinion of Liedtke’s projections.
Year to year growth rates are extremely volatile, normalizing in 2010. The negative rate could signify that in 2007 they are projecting to discontinue a product line. The swing back to a positive growth rate could be indication of AG leveraging its economies of scale and scope, while distributing their product lines through big box retailers. EBIT has been projected to gradually increase, which looks to be on par with industry norms.
It is reasonable to say that Liedtke’s projections properly reflect AG’s business model, post-acquisition.
3. See tables and calculations below
4. Do you regard the value you obtained as conservative or aggressive? Why?
From my analysis, the value I obtained seemed