Mercury Financial Valuation Case
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
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 a perfect balance. When we looked at the industrial average of revenue growth is 10% and AGI is below the standard, however Mercury is above by 2.55%. It is a good sign to move ahead for this acquisition, as it will enable AGI to remain at the top in the market.
Both
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
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 a perfect balance. When we looked at the industrial average of revenue growth is 10% and AGI is below the standard, however Mercury is above by 2.55%. It is a good sign to move ahead for this acquisition, as it will enable AGI to remain at the top in the market.
Both