...4050 SEPTEMBER 18, 2009 TIMOTHY A. LUEHRMAN JOEL L. HEILPRIN 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. West Coast Fashions, Inc. (WCF), a large designer and marketer of men’s and women’s branded apparel had recently announced plans for a strategic reorganization. The plan called for a divestiture of certain non-core assets and a renewed focus on WCF’s higher-end business, business-casual, and formal-wear apparel businesses. One of the divisions WCF intended to shed was Mercury Athletic, its footwear division. Liedtke knew that acquiring Mercury would roughly double Active Gear’s revenue, increase its leverage with contract manufacturers, and expand its presence with key retailers and distributors. He also expected that Active Gear’s bankers would quickly approach the company about a possible bid for Mercury; consequently, he wanted to complete his own rough evaluation of the opportunity before hearing the bankers’ pitch. Athletic and Casual Footwear Industry Footwear was a mature, highly competitive industry marked by low growth, but fairly stable profit margins. Despite the industry’s overall stability, the performance of individual firms could be quite volatile as they vied with one another to anticipate and exploit fashion trends. The market for athletic and casual shoes remained...
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...MERCURY ATHLETIC FOOTWEAR Problem statement: West Coast Fashions, Inc a large business of men’s and women’s apparel decided to dispose of one of their segments; Mercury Athletic. John Liedtke, head of the business development for Active Gear, Inc saw it has a possible opportunity for them to acquire it. The footwear industry is very competitive, with low growth and stable profit margins. AGI is very profitable but it is smaller than its competitors, which is becoming a disadvantage. Therefore, Liedtke believes that if they takeover Mercury will double AGI’s revenue, increase it’s leverage with contract manufactures and expand its presence with key retailers and distributions. Liedtke is evaluating the company in order to find out whether the future benefits justify or surpass the present value of the investment in Mercury. Analysis: In order for Liedtke to get a broader picture on the acquisition of Mercury, he needs to compare and analyze a list of financial data from 2006 to 2011; projected balance sheet accounts, operating results and free cash flows, and cost of capital calculations. This data will enable him to identify the strengths and weaknesses of this acquisition. First lets look a summary of the operations of both AGI and Mercury Athletics’ actual operations based on the last year given 2006 before AGI plans of acquiring Mercury. | Active Gear, Inc | Mercury Athletic | Revenues | $470, 286 m | $431,121 m | % Of Revenue Product | 42 % athletic...
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...Mercury Athletic Footwear1. Is Mercury an appropriate target for AGI? Why or why not? A recomendação é que a AGI se mostra um alvo interessante de compra para a AGI. Isso porque a Mercury atua em segmentos que a AGI possui pouca atuação. Dessa forma a AGI poderia ganhar market-share dentro da indústria de calcados e ter os ganhos de escala e redução de custos que seriam importantes para o aumento das margens e da lucratividade da empresa. A análise, feita baseada no método do FCD, considera: Valor: NPV+TV - Preço de Compra ------------------------ Saldo > 0 2. Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them? As projeções de Liedtke não prevêem esse ganho com a sinergia entre as empresas. Liedtke mantém as margens operacionais fixas durante o período de projeção e é bastante conservador em relação ao crescimento de vendas. Nesse caso, seria interessante medir e projetar os possíveis ganhos de escala e na redução de custos fixos e sua conseqüência no aumento da competitividade e no aumento das vendas (redução dos custos pode levar a uma redução nos preços para ganho de mercado ou manutenção das margens para maiores ganhos, dependendo da estratégia esperada para o grupo) 3 . Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Be prepared to defend additional assumptions you make. Fiquei em duvida em algumas coisas…. Para o calculo do Net working...
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...Libros de Gerencia Resumidos Curso corto para gerentes 33 tácticas para mejorar su carrera por Bil Holton y Cher Holton RESUMEN EJECUTIVO Bil y Cher Holton presentan 33 “recetas” cortas para mejorar de inmediato sus habilidades en el trabajo. Si se arriesga a probarlas, seguramente le ayudarán a ser más productivo, más efectivo y más visible ante los ejecutivos que le pueden ayudar en su carrera. Los consejos están clasificados por tópico: 1. Dar poder (Empower) a sus subordinados. 2. Actuar como un líder. 3. Dar la bienvenida al cambio. 4. Comunicarse para obtener mejores resultados. 5. Manejar el tiempo. 6. Alcanzar su máximo potencial. 7. Usar la creatividad en todo lo que hace. Lo interesante de estos consejos es que los puede aplicar utilizando los recursos con los que ya cuenta. No necesita pasar horas de estudio para comenzar a aplicarlos. La mayoría de las tácticas requieren trabajo y auto disciplina. Pero nadie ha logrado objetivos importantes de otra manera. Pequeñas celebraciones, hechas con frecuencia, hacen una gigantesca diferencia en la moral y en la productividad. 2. Administre la pila de trabajo Escriba la siguiente frase en un papel: “El procedimiento o regla o regulación o política más fastidioso y humillante con el que tengo que vivir es…”. Distribuya copias de este papel entre los miembros de su equipo e invierta una mañana discutiéndolo con ellos. Escriba todas las frustraciones en un papel, y comprométase de inmediato a hacer los cambios necesarios...
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...------------------------------------------------- ------------------------------------------------- Mercury Athletic Footwear: Valuing the Opportunity By Christian Daba Submitted To John Katkish Background West Coast Fashions, Inc has decided to sell one of their segments, Mercury Athletic in the context of a broader reorganization. The head of the business development for Active Gear, Inc(AGI), John Liedtke, views this event as a good opportunity to acquire Mercury Athletic. Acquiring Mercury, to a large extent, is driven by that Mercury would double Active Gear’s revenue, increase its leverage with contract manufacturers, and expand its presence with key retailers and distributors. More importantly, this is due to some inferior performance AGI is going through, mainly the small size does not put AGI in a dominating negotiating position with its contract manufacturers. Meantime, some possible synergies make Mercury Athletic a very appropriate target. However, John Liedtke has not completed his evaluation of this opportunity by using various methods. Qualitative valuation Firstly, there are some facts should be considered: 1. AGI and Mercury are in the same industry—footwear, and both have casual and athletic segments, and are located in North America. 2. Their brand images and target consumers are quite similar. AGI brand and logo are associated with a lifestyle hat was prosperous, active and fashion-conscious. Likewise, Mercury monitored styles and image that are from a global youth culture...
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...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 could gauge the pros and cons of this acquisition. Are the strategic reasons behind the Merger good enough? Explain As a team, we had different views on this question. Some reasons make us think that it may be beneficial for AGI to grab the opportunity but some make us think that it might not be as promising as it seems. Let us see why we feel it is a good idea for AGI to acquire Mercury. Active Gear Inc. Mercury Athletic Footwear Revenue $470,285mn $431,121mn % Revenue Product wise 42% Athletic 58% Casual 79% Athletic 21% Casual Operating Income $60.4mn $42,299mn Revenue growth 2% to 6% 12.5% Active Gear was one of the most successful firms in terms of profitability, in the footwear industry. Mercury looked like a good opportunity for an attractive investment because they almost have the same revenues, while being smaller in size, in the market. The Percent revenue in the casual footwear in AGI compensates for the gap in Mercury. It’s...
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...1 The Value of Synergy Aswath Damodaran Stern School of Business October 2005 2 The Value of Synergy Many acquisitions and some large strategic investments are often justified with the argument that they will create synergy. In this paper, we consider the various sources of synergy and categorize them into operating and financial synergies. We then examine how best to value synergy in any investment and how sensitive this value is to different assumptions. We also look at how this synergy value should be divided between the parties (or companies) involved in the investment. We conclude with an empirical examination of how much synergy is actually created in corporate mergers, and how much is paid. Synergy, we conclude, is so seldom delivered in acquisitions because it is incorrectly valued, inadequately planned for and much more difficult to create in practice than it is to compute on paper. 3 When Carly Fiorina argued for Hewlett-Packard’s acquisition of Compaq, she offered a number of of reasons the deal made sense. She noted that the combined company would be able to meet the demands of customers for “solutions capability on a truly global basis.” She also claimed that the firm would be able to lead with its products “from top to bottom, from low end to high end.” As her crowning argument, she claimed that the merger made sense because it would create “synergies that are compelling.” Synergy, the increase in value that is generated by combining two entities...
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...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 could gauge the pros and cons of this acquisition. Are the strategic reasons behind the Merger good enough? Explain As a team, we had different views on this question. Some reasons make us think that it may be beneficial for AGI to grab the opportunity but some make us think that it might not be as promising as it seems. Let us see why we feel it is a good idea for AGI to acquire Mercury. | |Active Gear Inc. |Mercury Athletic Footwear | |Revenue |$470,285mn |$431,121mn | |% Revenue Product wise |42% Athletic 58% Casual ...
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...1) Is Mercury an appropriate target for AGI? Why or why not? Explain. It can be recommended that Mercury could acquire AGI. Revenues of AGI ($470,286) and Mercury ($431,121) are somewhat similar, so acquiring Mercury will increase the sales. In addition, the remarkable part of the Mercury’s revenue comes from athletic shoes segment whereas AGI positions itself as a brand for more casual footwear. Thus, acquiring a brand specialized in a segment in which AGI is some kind of weak, might be a wiser decision. Moreover, by acquisition AGI can expand its distribution channels. Mercury spends lower amount of capital to production, acquiring may lower the production costs of AGI. In that case AGI can decrease its prices to some extent and relieve the pressure from suppliers and competitiors. 2. Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them? Justify. They are appropriate to some extend. However, assumptions that they made may not be come true. Especially, the one that winding down the women’s casual footwear within one year. 3.Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Be prepared to defend additional assumptions you make. Rd=6% T=40% Wd=20% We=80% WACC= wdxrd(1-T) + wsrs rs=rRF + (rM- rf)xb Assumptions: b= industry average= 1.5578 rM= industry average=9.7% rRF= US Treasury(10-20 years maturity)=4.83% rs=4.83 + (9.7 -4.83)x1.5578 = 12.42% ...
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...Active Gear, Inc. Active Gear, Inc. is an athletic shoe company, which, at the time of the case focuses on casual and recreational footwear aimed at a core demographic of suburban family members aged 25-45. The shoes are generally considered to be fashionable and functional. The casual line of shoes is sold in general retail stores, department, and specialty stores via wholesalers and independent distributors. The athletic line is made through independent sales representatives to a small number of sporting goods stores, pro shops, and specialty athletic stores. AGI has in part maintained their perceived high quality brand image by abstaining from selling through discount retailers. Although they feel this decision has preserved operating margins, they believe it has hurt sales growth. By focusing on a smaller portfolio, Active gear has been able to maintain relatively simple and efficient production an supply chains. This has led to a competitive advantage by way of avoiding poor industry cycles, write-downs, and missed profit opportunities. AGI’s days in inventory is 42.5, much lower than the industry average of 50.9. Despite the fact that AGI is among the most profitable firms in the industry, AGI has started to believe their smaller than industry average size is resulting in a competitive disadvantage. Mercury Athletic Mercury is a smaller shoe company with a highly niche market. The demographic for the company is 15 to 25 year olds with an interest in extreme sports...
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...Title: American muscle Purpose: After listening to my speech my audience will be familiar with the three American muscles of the 60’s. Thesis: Although there were many American Muscles cars created in the 60’s only three were widely recognized. I. Introduction A. Attention Getter: A loud roar is heard in the distance as the driver revs his engine. Eight cylinders of Intense power with its five speed transmission. Cars that are meant to be raced and compared to each other. In an adrenaline pumping race of performance. According to Fast Muscle by Gabbard and Gabbard, “The decade began with Ford, GM, and Chrysler in an expanding cubic inch and horsepower war. C. Thesis statement: Although there were many American Muscle cars created in the 60’s only three were widely recognized. D. Credibility statement: 1. I have worked and studied American muscles since I was 11 years old. 2. I have read and have done further research to develop this speech. E. Preview of main points: 1. Today I will discuss the muscles cars of Ford, 2. GM 3. and Chrysler Transition: “Now let us start our engine with Ford in the American muscle race.” II. Body A. Ford motor company 1. History I. Ford motor company was created in June 16, 1903 when some investor decided to sign article of incorporation for Ford motor company. II. The company was founded by Henry Ford Sr. ...
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...History Venus was formed 4.6 billion years ago along with the Sun and the solar system. Large amounts of dust and gases accumulated over many years to form the planet. Venus is thought to be the result of a large collision. This is due to the fact that Venus rotates differently than the other planets in our solar system. Venus is commonly referred to as Earth's "sister planet" because of their similarity in size as well as a similar gravitational force. Although Venus and Earth share some similarities, it has shown to be very different from Earth in many other aspects. It has the most dense atmosphere out of the four terrestrial planets. Venus consists of more than 96% carbon dioxide. Surface Geography: The surface shows evidence of extreme volcanism, and the sulfur in the atmosphere may mean that there have been some recent eruptions. Venus is covered by a thick atmosphere, creating a blazing environment with temperatures reaching high enough to melt lead. Geology: Much of Venus's surface appears to have been shaped by volcanic activity. Venus is home to about 167 large volcanoes. Some stretching over 100 km long. Venusian surface is estimated to be 300–600 million years old. Almost 2x longer than Earth's. Internal Structure The similarity in size and density between Venus and Earth may mean that they share a similar internal structure: a core, mantle, and crust. Like Earth, the Venus's core is at least partially liquid because the two planets have been cooling...
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...that many changes have aroused within younger generation. In today’s society, everything relies on technology and electronics, that it has now become a necessity rather than a recreational leisure item. With electronic devices or products, we only see the physical part of electronics but there are many chemicals, substances, and numerous parts within a simple device that are severely dangerous if consumed by any living organism. Many of the toxic substances that get released were improperly treated, stored, transported, or disposed of can be derived from the wiring, circuit boards, smaller electronic parts such as chips, monitors, and so forth. In addition, many of these electronic parts release severely dangerous chemicals such as; lead, mercury, zinc, silver, chromium, etc. There are many factors in which hazardous waste can affect us such as the following: - A large amount being released at once - Toxicity - Level of exposure/contact - Who particularly is exposed - Concentration/dose of exposure - How exposure is initiated - Time period of exposure For humans as well as animals and plants, there can be exposure through; inhalation, ingestion, or dermal exposure. Inhalation can be breathing dangerous chemicals in the form of vapors, or even from the contaminated water while drinking water from the tap or even as simple as showering. Furthermore, ingestion can take place through what we eat and whether or not it is contaminated itself such as; fish, fruits, veggies...
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...Myopia is defined by Merriam –Webster dictionary as “a lack of foresight or discernment: a narrow view of something” (“what is marketing myopia?). In terms of marketing this is demonstrated by a company displaying short sightedness and an inward approach that keeps the focus on the specific needs of the business rather than its products or the customer’s satisfaction. This phenomenon can destroy companies if it is not addressed immediately. A good example of marketing myopia would be Ford Motor Company’s attempt at a car called the Ford Edsel in the late 1950’s. The vehicle was a passenger car and it was Fords marketing approach with the introduction of this car that was going to revolutionize the industry. Ford was under the impression that the vehicle would meet the driving habits and needs of many domestic consumers and families. The Edsel was released with extreme publicity from marketing company’s and also the media, however it was soon after found out that the Ford Edsel would be a complete failure within the consumer market. Many may argue that the vehicle was just not a good car and did not sell well. If you ask a business professional about this they would most likely chalk it up to the company’s failure and inability to recognize the consumers’ needs and desires or as we now know it “marketing myopia.” A second way that marketing myopia may occur is slightly different however the same unwanted failure takes place. Like the text says, “many sellers make the mistake...
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...1. Why has NASA sent recent orbiters to Mars (such as Mars Reconnaissance Orbiter) on trajectories that required them to skim through Mars's atmosphere before settling into their final orbits? | | It saves money because the spacecraft uses atmospheric drag to slow down rather than needing to carry enough fuel to slow by firing rocket engines. | | | Each spacecraft also carried a lander, and the lander could only be dropped to the Martian surface when the spacecraft passed through the atmosphere. | | | It allowed the spacecraft to collect samples of the atmospheric gas for return to Earth. | | | It allowed the orbiters to get higher resolution pictures of the surface as it came close when skimming through the atmosphere. | 2 points QUESTION 2 1. Why was it advantageous for the Voyager mission to consist of flybys rather than orbiters? | | It was easier for data to be radioed back to Earth with flybys than orbiters. | | | Each individual spacecraft was able to visit more than one planet. | | | Spacecraft making flybys can return to Earth more quickly than orbiters. | | | Flyby spacecraft can get closer to a planet than an orbiting spacecraft. | 2 points QUESTION 3 1. Which of the following statements about the recently-discovered object Eris is not true? | | It orbits the Sun in the same direction as the other planets. | | | It lies well beyond Pluto and Neptune. | | | It is thought to be the first example...
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