Exotic Footwear Case Summary
Memorandum
To: Exotic Footwear Board of
From: CHT Partners
RE: The State of The Company
Date: December 12th, 2013
Exotic Footwear had an excellent current ratio in years 17 and 18, has had an A+ credit rating since year 15, and was the runner up for the Gold Star Award for corporate citizenship in year 14. Also, there was never a year when Exotic Footwear’s earnings per share was below 0. However, there are some issues that require your attention.
•
Exotic Footwear has continually failed to meet investor expectations
•
Exotic Footwear has significant operational inefficiencies
•
Lots of inventory/days in inventory way too high
•
Underperforming the market
•
In order to overcome these hazards, we …show more content…
have provided the following recommendations
•
Engage in a sell-side M&A process to find a strategic or a financial buyer
• divest •
Management-led Leveraged Buyout
◦
Strong credit rating, Can take on debt
◦
Low image rating means an opportunity to reinvent
◦
Low stock price
Because of our position in the industry (cite SGM), we believe that we are not in a position to merge or buy another company.
It is clear that our company is not distressed because of our current ratio, credit rating, cash flows. In addition to tangible financials, we can add value to an acquirer because of our endorsements and strong wholesaling business unit. We have assembled a list of potential acquirers and are approaching their management teams, as shown in figure (cite and do). we selected companies based on their values, size, and ability to finance the acquisition.
A management-led leveraged buyout of Exotic would both be feasible and practical. Because of our high credit rating (A+), we can borrow at 4.5%. We are able to meet the obligations of the payments because our global unit sales have increased over time, and because we have consistently been profitable. Ability to pay for the debt is not reason enough to go through with a buyout. There are significant other reasons as well; our EPS has never been lower (cite), our image rating is low (cite), we are a well established business, and there are viable exit opportunities because of the number of viable buyers in the
industry.
One of the issues that we faced was with our distributiobn channels. We weren’t focsusing on our private label and that had created issues within our industry. THe cost for private label was too high abnd it didn’t generate profit that we were expecting. During year 18, we did privater labbel through latin america and even then, the cost was at 31.5, which was above average for industry 48.
To: Exotic Footwear Board of
From: CHT Partners
RE: The State of The Company
Date: December 12th, 2013
Exotic Footwear had an excellent current ratio in years 17 and 18, has had an A+ credit rating since year 15, and was the runner up for the Gold Star Award for corporate citizenship in year 14. Also, there was never a year when Exotic Footwear’s earnings per share was below 0. However, there are some issues that require your attention.
•
Exotic Footwear has continually failed to meet investor expectations
•
Exotic Footwear has significant operational inefficiencies
•
Lots of inventory/days in inventory way too high
•
Underperforming the market
•
In order to overcome these hazards, we …show more content…
have provided the following recommendations
•
Engage in a sell-side M&A process to find a strategic or a financial buyer
• divest •
Management-led Leveraged Buyout
◦
Strong credit rating, Can take on debt
◦
Low image rating means an opportunity to reinvent
◦
Low stock price
Because of our position in the industry (cite SGM), we believe that we are not in a position to merge or buy another company.
It is clear that our company is not distressed because of our current ratio, credit rating, cash flows. In addition to tangible financials, we can add value to an acquirer because of our endorsements and strong wholesaling business unit. We have assembled a list of potential acquirers and are approaching their management teams, as shown in figure (cite and do). we selected companies based on their values, size, and ability to finance the acquisition.
A management-led leveraged buyout of Exotic would both be feasible and practical. Because of our high credit rating (A+), we can borrow at 4.5%. We are able to meet the obligations of the payments because our global unit sales have increased over time, and because we have consistently been profitable. Ability to pay for the debt is not reason enough to go through with a buyout. There are significant other reasons as well; our EPS has never been lower (cite), our image rating is low (cite), we are a well established business, and there are viable exit opportunities because of the number of viable buyers in the
industry.
One of the issues that we faced was with our distributiobn channels. We weren’t focsusing on our private label and that had created issues within our industry. THe cost for private label was too high abnd it didn’t generate profit that we were expecting. During year 18, we did privater labbel through latin america and even then, the cost was at 31.5, which was above average for industry 48.