Let me walk you through some qualitative considerations before making my recommendation. ... Age Discrimination In The Workplace Case Study. 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. Active Gear had recently increased its supplier concentration to improve its negotiating position because AGI’s small size … 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. Analysis on Mercury acquisition 4 Referencing the Free Cash Flow and Terminal Value tables (found below), I will be able to generate an opinion of Liedtke’s projections. Should AGI purchase Mercury? 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. Valuing the Opportunity 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. before hearing the bankers’ pitch. In order to emphasizing individual products, it began to monitor styles and images from global culture Due to a strategic reorganisation. This is because Mercury and AGI both are the footwear industry. In this case, the cashinflow is the acquisition price, which used to purchase the Mercury Corporation. Footwear was a mature, highly competitive industry marked by low growth, but fairly stable 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 … 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. John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. Because of Chinese manufacturing contract consolidations, AG’s size was becoming a disadvantage due to low buying power vs. competitors. Finally, acquainting Mercury is ease of integration. 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…). First, acquiring Mercury could improve both companies financially. Mercury Athletic Footwear Case Solution,Mercury Athletic Footwear Case Analysis, Mercury Athletic Footwear Case Study Solution, QUESTION 1 If we look at the valuation of Mercury for the part D and part F, then a difference could be seen between the enterprise values. 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 … And the main products... ...2009 se. Mercury Athletic Footwear - Acquisition Analysis ACTIVE GEAR COST OF CAPITAL ASSUMPTION Tax Rate Cost of Debt Risk Free Rate Expected Market Return Market Risk Premium Asset βeta Debt-to-Value Ratio Debt-to-Equity Ratio Equity Beta 40.0% 6.00% 4.93% 10.43% 5.50% 20.0% 25.0% 0.970 CASH FLOW AND OPERATING ASSUMPTIONS Over the years, the firm’s athletic shoes had evolved from high-performance footwear to athletic fashion wear with a classic image. Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. Great pressure from suppliers and competitors caused some deterioration of basic performance for AGI during 2004–2006. 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. 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.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. AG was among the first companies to offer fashionable, walking, hiking and boating footwear. 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. Target market of both men and women Market Overview Thisprice per earnings ratio is used because it is the closest number that can match the marketview of Mercury Athletic. 839 Words 4 Pages. The acquisition of the Mercury Athletic division has sources of potential including an increase in Active Gear’s revenue, an increase in leverage with contract manufacturers, boosting capacity utilization and expanding its presence with retailers and distributors. 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. bid for Mercury; consequently, he wanted to complete his own rough evaluation of the opportunity AGI’s head of business development, John Liedtke, believes acquiring Mercury Athletic Footwear is a good option for the company. Mercury Athletic Footwear – Acquisition Analysis. 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. In order to provide a solid recommendation to Liedtke, further analysis must be performed. ... • AGI strives in the casual footwear segment with a revenue of 470 million while Mercury is in the Athletic footwear segment making 431 million a year. Fiore was forced to sell the company after running it for over 35 years, due to health problems. He also expected that Active Gear’s bankers would quickly approach the company about a possible It is reasonable to say that Liedtke’s projections properly reflect AG’s business model, post-acquisition. The subsidiary that Liedtke and AG intended to acquire was Mercury Athletic (MA), a footwear company. The apparel or footwear industry is highly competitive with low growth. Discussion Materials For Additional Coverage of the Topics Please See Your Professor Or E-mail me at jheilprin@hbs.edu Harvard Business School Joel L. Heilprin 59th Street Partners LLC. Don’t waste Your Time Searching For a Sample, Get Your Job Done By a Professional Skilled Writer. In order to find if the projections are reasonable, you need a starting point. Active Gear to acquire Mercury Athletic Footwear. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. 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. If you are not following the correct format for writing a Case Study Solution, then it becomes quite risky and profoundly affects your status. JOEL L. HEILPRIN EBIT has been projected to gradually increase, which looks to be on par with industry norms. Quantitative Analysis Acquiring MA- AG would be less affected by the Chinese manufacturing contract consolidation, due to increased buying powers. Blog. Companies can reduce risk factors by not following fashion trends which equates to efficient and effective inventory management and missed profit opportunities. During the past three years AGI’s revenue has grown at an average annual rate of only 2.2% while the industry average is about 9.7%. Synergy Effects of the Acquisition 6 Due to a strategic reorganization, the plan called for the divestiture of MA and other “non-core” WCF assets. From my analysis, the value I obtained seemed to be aggressive against the information provided. Are they appropriate? Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. AG is a relatively small athletic and casual footwear company. 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. For making a decision regarding the acquisition being appropriate or not, the facts and side effects of acquisition should be considered first. Nicholas Thebeau, Student ID 50927830 ACTIVE GEAR COST OF CAPITAL ASSUMPTION Tax Rate Cost of Debt Risk Free Rate Expected Market Return Market Risk Premium Asset ?eta Debt-to-Value Ratio Debt-to-Equity Ratio Equity Beta 40.0% 6.00% 4.93% 10.43% 5.50% 20.0% 25.0% 0.970 How to increase brand awareness through consistency; Dec. 11, 2020. c. Estimation for long-term growth rate and estimate the terminal value 5 4 Secondly, acquiring Mercury is a lower risk way for AGI to increase their growth rate. also offered here. The plan called for a divestiture of certain non-core Why or why not? Presently, AGI is much smaller than its competitors, and that is putting them at a competitive disadvantage from a supply chain standpoint. It has annual revenues of $470.3M (42% of revenues came from athletic shoes), and $60.4M of operating income. The market is influenced by fashion trends, price, quality and style. Although AGI is currently among the most profitable firms in the footwear industry, it is also much smaller than most of its competitors, which the company’s management views as a competitive disadvantage. Second, by increasing the size of the AGI they would realize certain supply chain benefits. The apparel or footwear industry is highly competitive with low growth. Dr. Adam Guerrero John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. This will be discussed further in the recommendation. Having a positive NPV and an IRR that considerably outweighs the discount and risk free rate- suggests that this acquisition should be pursued. One of the divisions WCF intended to shed was Mercury Athletic, its footwear division. Acquiring MA could lead to economies of scale and scope through manufacturing and distribution networks, respectively. Declining revenue growth. 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). The market is influenced by fashion trends, price, quality and style. Because of consolidation of Chinese manufacturers, AGI and its competitors were being pressured to commit to larger manufacturing runs in an effort to increase capacity utilization. Target customers are urban and suburban family members aged 25 to 45. Active Gear, Inc. (AGI) is a privately held footwear company and is contemplating the possibility of acquiring Mercury Athletic Footwear. AG’s initial focus was to produce and market high-quality specialty shoes for golf and tennis players. Get a verified writer to help you with Mercury Athletic Case. Mercury Athletic. Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. Products were distributed to departmental and discount stores 5. There are four main reasons supporting this acquisition. The IRR of this acquisition is 28%. ...There are several reasons why AGI should consider Mercury Athletic as an appropriate target for acquisition. n. As. 4. Mercury Athletic is the footwear division of West Coast Fashions (WCF), a designer and marketer of men’s and women’s apparel. 2. 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. Fiore was forced to sell the company after running it for over 35 years, due to health problems. Fiore was forced to sell the company after running it for over 35 old ages. 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). Do you regard the value you obtained as conservative or aggressive? Boosta Ltd - 10 Kyriakou Matsi, Liliana building, office 203, 1082, Nicosia, Cyprus. Mercury Athletic Footwear Case Study: Corporate Valuation First name, last name Subject Professor Submission Date Mercury Athletic Footwear Case Study: Corporate StudentShare Our website is a unique platform where students can share their papers in a … Mercury Athletic Case . Quantitative Analysis 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 Why? Also, Mercury could easily adopt AGI’s inventory management system which would help to... ...Mercury Athletic Footwear: Valuing the Opportunity Due to unspectacular financial reports, the division was going to be sold. Mercury Athletic. 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