Essay Mercury Athletic

2214 Words Jul 23rd, 2014 9 Pages
Mercury Athletic Footwear: Valuing the Opportunity

Team 10 / Mergers and Acquisitions

West Coast Fashions, Inc (WCF) was a large business, which dealt with men’s and women’s apparel. One of their segments was Mercury Athletic Footwear. WCF wanted to dispose off this segment. They just wanted to divest because they wanted to focus more on their core business and move it up to the elite class.

John Liedtke was the Business Development Head at that time in Active Gear Inc. He had a clear idea that acquiring Mercury will shoot up AGI’s revenues for sure. It would also ensure an expansion of the key business. In order to get a clearer picture on the acquisition, he needed to compare and analyze the company’s financials well. By this he
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The Percent revenue in the casual footwear in AGI compensates for the gap in Mercury. It’s a perfect balance. When we looked at the industrial average of revenue growth is 10% and AGI is below the standard, however Mercury is above by 2.55%. It is a good sign to move ahead for this acquisition, as it will enable AGI to remain at the top in the market.

Both companies are in the same industry and have same products. Both Mercury and AGI does its manufacturing in China. AGI sourced its resources to the contract manufacturers in China. Mercury can leverage with these manufacturers as China just experienced a wave of consolidation favorable for these kinds of manufacturers. This, in turn, can enable AGI to have the opportunity to expand with its top retailers and distributors.

Mercury’s cost of manufacturing is low and could help to sync the lower profit margins of AGI, which it had been facing from its suppliers, distributors and consumers. (Refer Case Page 5 and 3). Mercury had always been an autonomous body, which maintained its own financials, data management, resource management and distribution. This would pave a smooth way for AGI to take over. This smoothness could not have been expected had Mercury been totally under WCF.

Now let us look at why some of the members of the team thought that the acquisition is not an appropriate decision:

There would be

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