Free cash flow would grow in the speed of firm growth rate. There are four main reasons supporting this acquisition. The objective of the acquisition is to improve firm size, increase growth rate and expand market share.
The combined company would have the same risk as before. Analysis on Mercury acquisition 1. Risk free rate is 4. Return on investment is estimated by return on assets. In addition, AGI could expand its market share by enlarging target customers. Second, this combination would expand firm size and help AGI achieve good bargains with suppliers.
Mercury would help increase revenue of AGI through Internet sales channel and discount retailors. First of all, this acquisition would not be costly since AGI and Mercury share several similar characteristics in footwear industry. Therefore we can get weighted average cost of capital of mercury would be Finally, we take the average growth rate of 2.
Market premium would be average market premium duringwhich is about 7. 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.
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.
Finally, AGI could enjoy a positive synergy effects. AGI can solve these problems by merging with Mercury Athletic. Taxes are only market imperfection. One is that AGI is smaller than other competitors, which is becoming a competitive disadvantage.
Before calculation, we make some assumptions. 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.
They could share same product segments and sale channels after acquisition. There are two main problems.
Additionally, they can share the resources and infrastructure through the geographical advantage since their manufactures are both placed in China. Get Full Essay Get access to this section to get all help you need with your essay and educational issues. The combined firm would begin to grow stably in and have the same free cash flow every year.
Currently, pressure from suppliers and competitors caused some deterioration of basic performance for AGI during — First, AGI could take advantages of additional sales channel after the acquisition.
Reasons why Mercury is an appropriate target for AGI Great pressure from suppliers and competitors caused some deterioration of basic performance for AGI during — Target customers of the two companies are different in age. Overview of problems The footwear industry is mature, highly competitive with low growth but stable profit margins. Mercury Athletic Footwear: Valuing the Opportunity Group 1 Bushra Javed Butt M.
Sharjeel Shahid Mahnoor Malik Uzair Nasir MBA II – Section A Submitted To: Sir Nawazish Mirza Introduction West Coast Fashions, Inc.
(WCF), a large designer and marketer of men’s and women’s apparel decided to dispose of one of their divisions;. 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 Case Essay Words | 6 Pages. endangered Active Gear’s growth. Mercury Athletic Footwear designs and distributes athletic and casual footwear dominantly to the youth market.
Mercury competes in four main product lines: men’s and women’s athletic and casual footwear. 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. 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.Download