There are two main problems. In addition, AGI could expand its market share by enlarging target customers.
They could share same product segments and sale channels after acquisition. Overview of problems The footwear industry is mature, highly competitive with low growth Mercury athletic footwear 2 essay stable profit margins. The combined company would have the same risk as before.
Get Full Essay Get access to this section to get all help you need with your essay and educational issues. Risk free rate is 4. Currently, pressure from suppliers and competitors caused some deterioration of basic performance for AGI during — The objective of the acquisition is to improve firm size, increase growth rate and expand market share.
Return on investment is estimated by return on assets. Since Mercury sourced substantially all of its production from independent contractors in Asia and had professional and technical personnel in China, the bigger company after acquisition may offer longer production runs for manufactures and be more powerful to bargain with them.
Finally, we take the average growth rate of 2. AGI can solve these problems by merging with Mercury Athletic. Second, this combination would expand firm size and help AGI achieve good bargains with suppliers.
Market premium would be average market premium duringwhich is about 7. Analysis on Mercury acquisition 1. Additionally, they can share the resources and infrastructure through the geographical advantage since their manufactures are both placed in China. Before calculation, we make some assumptions.
Taxes are only market imperfection. There are four main reasons supporting this acquisition. Target customers of the two companies are different in age.
First of all, this acquisition would not be costly since AGI and Mercury share several similar characteristics in footwear industry. First, AGI could take advantages of additional sales channel after the acquisition.
One is that AGI is smaller than other competitors, which is becoming a competitive disadvantage. Mercury would help increase revenue of AGI through Internet sales channel and discount retailors.
Currently, AGI faced great pressure from consolidation of suppliers in China to boost capacity utilization, which became a competitive disadvantage due to its relative smaller size. Finally, AGI could enjoy a positive synergy effects. Therefore we can get weighted average cost of capital of mercury would be The combined firm would begin to grow stably in and have the same free cash flow every year.
Reasons why Mercury is an appropriate target for AGI Great pressure from suppliers and competitors caused some deterioration of basic performance for AGI during — Free cash flow would grow in the speed of firm growth rate. 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.Mercury Athletic Footwear Case Essay.
Mercury athletic footwear Group 7 Contents Executive Summary & Overview of Problems 3 Analysis on Mercury acquisition 4 1.
Reasons why Mercury is an appropriate target for AGI 4 2. Estimation the value of Mercury based on discounted cash flows and Liedtke’s base case projections. 4 a. 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. Mercury would provide a boost in AGI’s athletic line. AGI’s casual footwear would benefit Mercury. Also, although AGI is well below the average growth percentage of 10% for its group, Mercury stands above the average with % revenue growth/5(1).
We believe Mercury Athletic Footwear is an appropriate target for AGI to achieve such a goal for following reasons. First of all, this acquisition would not be costly since AGI and Mercury share several similar characteristics in footwear industry.
Essay on Mercury Athletic Footwear: Valuing the Opportunity SEPTEMBER 18, TIMOTHY A. LUEHRMAN JOEL L. HEILPRIN Mercury Athletic Footwear: Valuing the Opportunity In MarchJohn Liedtke, the head of business development for Active Gear, Inc., a privately held footwear company, was contemplating an acquisition.
Specialty athletic footwear that evolved from high performance to athletic fashion wear with a “classic” appeal. Casual/recreational footwear for walking, hiking, boating, etc. Affluent urban & suburbanites in the age range (i.e.