Mercury Athletic Footwear
There are several reasons why AGI should consider Mercury Athletic as an appropriate target for acquisition. First, acquiring Mercury could improve both companies financially. Acquiring Mercury would double AGI’s revenue. Although Mercury’s financial performance has been disappointing, they experienced top line growth of 20% in 2006. Unfortunately, their profitability has been disappointing due to price concessions to big box retailers and an unsuccessful women’s line. Mercury’s (and ultimately AGI’s) profitability could be improved by the synergies of the two companies merging. Synergies within supply chain, operations, research and development, and advertising should all improve Mercury’s EBITDA.
Second, by increasing the size of the AGI they would realize certain supply chain benefits. Presently, AGI is much smaller than its competitors, and that is putting them at a competitive disadvantage from a supply chain standpoint. Because of consolidation of Chinese manufacturers, AGI and its competitors were being pressured to commit to larger manufacturing runs in an effort to increase capacity utilization. With fewer and bigger Chinese manufacturers, larger shoe sellers would have an advantage. By roughly doubling the volume after the proposed acquisition, AGI would be in a better negotiating position. Also, Mercury could easily adopt AGI’s inventory management system which would help to improve their higher-than-average Days Sales in Inventory numbers.
Third, this acquisition would present some possible marketing advantages. It would widen the market that AGI was able to reach. It would expand its current market of 25 to 45 year olds to the 15 to 25 year old demographic that Mercury serves. Also, it would add a brand with price points that were lower than theirs, allowing them to reach more customers. This would allow them growth by reaching a new demographic without competing with or cannibalizing their current market. Also, despite the
Second, by increasing the size of the AGI they would realize certain supply chain benefits. Presently, AGI is much smaller than its competitors, and that is putting them at a competitive disadvantage from a supply chain standpoint. Because of consolidation of Chinese manufacturers, AGI and its competitors were being pressured to commit to larger manufacturing runs in an effort to increase capacity utilization. With fewer and bigger Chinese manufacturers, larger shoe sellers would have an advantage. By roughly doubling the volume after the proposed acquisition, AGI would be in a better negotiating position. Also, Mercury could easily adopt AGI’s inventory management system which would help to improve their higher-than-average Days Sales in Inventory numbers.
Third, this acquisition would present some possible marketing advantages. It would widen the market that AGI was able to reach. It would expand its current market of 25 to 45 year olds to the 15 to 25 year old demographic that Mercury serves. Also, it would add a brand with price points that were lower than theirs, allowing them to reach more customers. This would allow them growth by reaching a new demographic without competing with or cannibalizing their current market. Also, despite the