So John Liedtke would have to be very careful and strategic in his negotiation. This is a company whose growth has been faltering at best and there would be need to not only redesign but to totally restructure it in order to ensure that the expected profitability is achieved. So the negotiating tactic would involve pointing out the reasons that led to the disappointing performance of Mercury and the decision to sell it in the first place. The company has not been pulling its weight in West Coast Fashionsstable, a cat that is borne by its disappointing profit margins (Falk and Hagman 2002). Competition in branded footgear is cut-throat and trying to sell branded sporting footwear is even more tricky as it has to combine the fickleness of fashion apparel with the practicality and purposefulness of sporting wear, a factor that contributed to Mercury’s dismal performance especially in the ladies casual footwear department. Active Gear would have to point this out as a major impediment in their future marketing products that they acquire from the West Coast Fashions group. There is also need to consolidate manufacturers in Asia. The more split up the manufacturers an manufacturing plants the higher the maintenance costs and lower the profit margins so Active Gear would have to aggressively work on rationalizing and improving the efficiency of the manufacturing plants overseas and integrating them with their own existing ones. Staffing costs are also always a sticking point when it comes to acquiring new firms and Active Gear would have to bear the costs of reorganizing as well as restructuring staffing levels at the new outfit not only to make it conform with Active Gear’s own existing staff and staffing levels but also do this without adversely affecting productivity and staff morale which is always a challenge. Then there are the costs associated with layoffs and redundancies that would certainly have to be factored in. From the attached tables the lowest offer that AG would make for Mercury would be $300 million based on past performance and the expected revenues. The highest price that Active Gear should pay for Mercury is $330 million (Falk and Hagman 2002). The long term prospects of the major are the main driving force for this acquisition as the short term prospects coupled with the massive reorganization that would have to be done to integrate Mercury products into Active Gear’s own schedules, marketing and planning would take a long time. The Discount Rate used for this calculation took into account the EBIT margin of 9% and expected revenue growth of 3%.So Lietdke’s major tack would be to point out all the work that would need to be done to make the acquisition [profitable for Active Gear while pointing out the expected rise in income that all these measures would result in if they were to be successful. The outsourcing of manufacturing to China which has become increasing popular with American manufacturers has both gainers and losers. The major players who gain with this sort of outsourcing are the American companies which are able to keep their production prices relatively low and thus produce products that can be more competitively priced and which results in higher profits. The other gainers in this process are the Chinese manufacturing plants whose staffs are employed in these plants. They are able to maintain jobs and keep themselves in employment at the expense of American factory workers who would
Mercury Athletic Footwear Case Study: Corporate Valuation First name, last name Subject Professor Submission Date Mercury Athletic Footwear Case Study: Corporate Valuation Takeovers of existing companies and especially a manufacturing company are fraught with uncertainty and a great degree of grey areas…
The corporate houses or rather the global corporate houses might be considered as the flag bearer of this immense potential of trade and investment. However with great power come greater responsibilities and the corporate are no exception to this golden rule.
As the corporate kept on spreading like an inferno it was realised that apart from market based financial success a corporate now also has to look after the associated social and moral values of each particular place that they might venture in. Courting this situation the concept of Corporate Social Responsibilities emerged that was later maintained by some and earned them good reputation while refuted by others and marked them in human history as profit mongers, ethics less business tycoons who valued individual benefit much above the optimum social solution.
The most common forms of fraudulent activities include 1) reporting fictitious revenues 2) understating liabilities and expenses 3) improper valuation of assets and liabilities (Klapproth, 2011). On the other hand, the procedure of creative accounting is used to create loopholes in the company’s regulatory system.
Through this period, their products have increased in popularity and so has their sales. Currently it is one of the world’s largest producers of athletic shoes. Nike provides employment to almost 50000 people globally, which is the highest compared to the other footwear producing companies.
Free cash flow analysis is the most suitable method of determining a possible acquisition. The analysis and calculations regarding the present value of Mercury Athletic Footwear are shown. I have attached the workings in an excel document. Value of Mercury Athletic Footwear 2007 2008 2009 2010 2011 1 2 3 4 5 Revenue 479,329.00 489,028.00 532,137.00 570,319.00 597,717.00 Less: Cost of Revenue 423,837.00 427,333.00 465,110.00 498,535.00 522,522.00 Less: SA&A 8,487.00 8,659.00 9,422.00 10,098.00 10,583.00 Operating Earnings 47,005.00 53,036.00 57,605.00 61,686.00 64,612.00 Add Depreciation & Amortization 9,587.00 9,781.00 10,643.00 11,406.00 11,954.00 EBIT 56,592.00 62,817.00 68,248.00 73,092.0
ccording to Porter, generic strtegies re bsed on the competitive methods nd scope of the orgniztion, both of which compromise its strtegy. These strtegies re differentition nd cost ledership, differentition focus nd cost focus.
In order to differentite, ccording to distinct ptterns of strtegic behvior, Nike enters new mrket, the footbll tem kit.
The project has in fact a long spanning history of 250 years when people in France were thinking of a better way of crossing the Channel. 1
The Academy of Amines launched a competition on how to cross the channel in 1751 and the winner turned out to be a man called Nicolas Desmarets, who suggested construction of a tunnel.
changes due to changes in operating environments such as government regulations, pollution concerns, privatisation, innovations and industry competition. The analysis is both on the macro-economic level affecting the industry as well as micro-economic considerations unique to
The company, Macpac was established in New Zealand. McIntyre found a group of young men from Canterbury Mountaineering Club who was proceeding towards South American Andees for an expedition at that time. The idea first came into the mind of Bruce McIntyre of making