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Mercury Athletic Footwear: Valuing the Opportunity
Merger and Acquisition Assignment

* Is mercury an appropriate target for AGI? Why or Why not?

The footwear industry is highly competitive industry with fairly stable profit margins. In this industry, players compete on basis of style, price and quality. Success factors are active management of inventory and production.
Active Gear is a profitable firm in the industry; however Active Gear is a smaller firm than many other competitors and its small size is becoming a competitive disadvantage. The rise of large retailers has also endangered Active Gear’s growth.
Mercury Athletic Footwear designs and distributes athletic and casual footwear dominantly to the youth market. Mercury competes in four main product lines: men’s and women’s athletic and casual footwear. Men’s athletic footwear is the leading product for Mercury Athletic. Women’s casual footwear is Mercury’s worst performing product and post-acquisition the line may be discontinued by Active Gear.

The below table lists some financial and other aspects of both firms:

| Active Gear Inc | Mercury Athletic | Financial Aspect: | Revenues | $470,286 M | $431,121 m | % of Revenue Product | 42% Athletic58% Casual | 79% Athletic21% Casual | Operating Income | $60.4 m | $42,299 m | Revenue Growth | $2-6% | 12.5% | DSI (Days Sales Inventory) | 42.5 | 62.2-10 days more than industry | Other Aspects: | Demographical Target | Family members | Youth market | Brand Image | Classic & lifestyle | Flexible | Price Level | Middle & high | Low & middle | Distribution | Independent sales representatives, sores, independent distributors(Didn’t sell through discount retailers) | Department stores and discount retailers |

Common grounds between AGI and Mercury and possible synergies: * AGI & Mercury are dealing in the

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