Also, Mercury could easily adopt AGI’s inventory management system which would help to... ...Mercury Athletic Footwear: Valuing the Opportunity This is because Mercury and AGI both are the footwear industry. d. Estimation value of Mercury based on estimates from (a) to (c) 6 Due to unspectacular financial reports, the division was going to be sold. Mercury Athletic Footwear – Acquisition Analysis. Mercury Athletic Case. Companies can reduce risk factors by not following fashion trends which equates to efficient and effective inventory management and missed profit opportunities. (WCF), a large designer and marketer of men’s and women’s branded apparel had recently Thisprice per earnings ratio is used because it is the closest number that can match the marketview of Mercury Athletic. The market is influenced by fashion trends, price, quality and style. Acquiring MA will double AG’s annual revenue. Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. Referencing the tables below: Synergies are excluded from financial analysis Because of Chinese manufacturing contract consolidations, AG’s size was becoming a disadvantage due to low buying power vs. competitors. Over the years, the firm’s athletic shoes had evolved from high-performance footwear to athletic fashion wear with a classic image. Blog. AG and MA are both competing in the athletic and casual footwear industry. Let me walk you through some qualitative considerations before making my recommendation. Acquiring Mercury would double AGI’s revenue. Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. 4 March, 2015 Preempting analyst calculations and the West Coast offer, Liedtke wants to perform his own analysis of the potential acquisition. 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. They maintained their own financial statements, databases, resource management systems, and distribution facilities (Luehrman & Heilprin, 2009). Some of the essential factors that we focus on while developing Case Study Solution content are: the program called for the divestiture of MA and other “non-core” WCF assets. 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. Mercury has a high growth rate of revenue, which may compensate for the low growth rate of revenue for AGI. Acquiring Mercury would expand AGI’s business size and consequently produce the “one plus one is greater than two” effect. Mercury Athletic Case . Great pressure from suppliers and competitors caused some deterioration of basic performance for AGI during 2004–2006. Referencing the Free Cash Flow and Terminal Value tables (found below), I will be able to generate an opinion of Liedtke’s projections. In conclusion, AG should acquire MA. 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. profit margins. While Mercury Athletics was an owned subsidiary of WCF, they were allowed to operate with a rather large amount of autonomy. Quantitative Analysis Moreover, if negotiated well, AGI could acquire Mercury for a lower price than the actual price of Mercury; earning more than what they’ve paid. 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. AG is a relatively small athletic and casual footwear company. Acquiring MA- AG would be less affected by the Chinese manufacturing contract consolidation, due to increased buying powers. Mercury Athletic Footwear: Valuing the Opportunity Case Study Team members: Xingru Deng Zhiqiang Qing Ke Ma Ying Acquiring MA could lead to economies of scale and scope through manufacturing and distribution networks, respectively. 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. 1. With fewer and bigger Chinese manufacturers, larger shoe sellers would have an advantage. Don’t waste Your Time Searching For a Sample, Get Your Job Done By a Professional Skilled Writer. 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. AG excluded big box retailers and discount stores. 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 … John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. Casual shoes focus on mainstream market. Br. AG’s distribution channels consisted of independent retailers, departmental stores, and wholesalers. Mercury Athletic Footwear: Due to a strategic reorganisation. Active Gear to acquire Mercury Athletic Footwear. bid for Mercury; consequently, he wanted to complete his own rough evaluation of the opportunity This reflects a good acquisition opportunity. It has annual revenues of $470.3M (42% of revenues came from athletic shoes), and $60.4M of operating... ... Company culture matching could also become problematic. 2. Review the projections by Liedtke. JOEL L. HEILPRIN 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 … 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. 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. Using projected growth rates and EBIT should indicate if Liedtke’s data is solid. 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 apparel or footwear industry is highly competitive with low growth. In order to find if the projections are reasonable, you need a starting point. Year to year growth rates are extremely volatile, normalizing in 2010. MA developed an operating infrastructure, allowing management to quickly adapt to changes in customer tastes with product specifications. 3. 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. Declining revenue growth. 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. Market Overview 2. Two main problems are continuing low growth rate because of serious competition of the mature footwear industry and rise of discount retailors, and pressure from supplies to boost capacity utilization because of its relative smaller firm. 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 wellness jobs. Why? Problem Statement 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 Active Gear, Inc. (AG), a privately held footwear company, was contemplating an acquisition opportunity. How would you analyze possible synergies or other sources of value not reflected in Liedtke’s base assumption? Secondly, acquiring Mercury is a lower risk way for AGI to increase their growth rate. Net present value of future cash flows equates to a positive $0.2M. Executive Summary Get a verified writer to help you with Mercury Athletic Case. Goldman Sachs Case Competition. 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. To begin the analysis, we examine both companies’ historical financial data to get a better idea of their respective financial health. John Liedtke, the head of business development for AG, was interested in a WCF subsidiary. 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. Overview First of all, this acquisition would not be costly since AGI and Mercury share several similar characteristics in footwear industry. He also expected that Active Gear’s bankers would quickly approach the company about a possible AG is a relatively small athletic and casual footwear company. 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%. a. Estimation of the weighted average cost of capital 5 Mercury Potential to double revenues Increase leverage with manufacturers Increase long run growth rate Expand presence with key retailers and distributors. leverage with contract manufacturers, and expand its presence with key retailers and distributors. By continuing we’ll assume you’re on board with our cookie policy. It had two product lines- athletic and casual footwear Case Study Analysis Solutions Mercury Athletic Footwear Case Solution In order to summarize, due to AGI’s small size, there is a strong risk of being overtaken by the other giant players in the market therefore, if it acquires Mercury, the risk will be minimized and there is a strong opportunity that the company will grow steadily. 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. 4 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. How would you recommend modifying them? Active Gear had recently increased its supplier concentration to improve its negotiating position because AGI’s small size … Mercury Athletic was purchased by WCF from its laminitis Daniel Fiore. se. Please join StudyMode to read the full document. Mercury Athletic Footwear: Valuing the Opportunity n. As. Athletic shoes developed from high-performance footwear to athletic fashion wear. Financial synergies would include combining revenues and cost benefits, which translate to increasing bottom line. In order to provide a solid recommendation to Liedtke, further analysis must be performed. Mercury Athletic was purchased by WCF from its founder Daniel Fiore. Writing a Case Study Solution requires a student to consider various vital factors before working on it. West Coast Fashions, Inc. 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. 1. held footwear company, was contemplating an acquisition opportunity. Footwear was a mature, highly competitive industry marked by low growth, but fairly stable 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). As shown in the table below, Mercury dropped... ... -Founded in 1968 by Daniel Fiore -Producer, designer and distributor of branded athletic and Boosta Ltd - 10 Kyriakou Matsi, Liliana building, office 203, 1082, Nicosia, Cyprus. In order to provide a solid recommendation to Liedtke, further analysis must be performed. Net Working Capital. AG’s initial focus was to produce and market high-quality specialty shoes for golf and tennis players. 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. Do you regard the value you obtained as conservative or aggressive? 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. Active Gear Although Mercury’s financial performance has been disappointing, they experienced top line growth of 20% in 2006. The market is influenced by fashion trends, price, quality and style. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. Should AGI purchase Mercury? Harvard Business Case Studies Solutions - Assignment Help. Mercury Athletic is the footwear division of West Coast Fashions (WCF), a designer and marketer of men’s and women’s apparel. Mercury Athletic. Contents 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. 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