Mercury Athletic Footwear: Valuing the opportunity Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Mercury Athletic Footwear: Valuing the opportunity Case Solution

1. The strategic merits of acquiring Mercury from Liedtke’s perspective

The strategic merit is that both companies Mercury and AGI, are footwear companies that attract the youth market. The integration of both the companies would be considered as a horizontal integration since both of them belong to the same industry (i.e. footwear). Along with this, the acquisition would lead to an increase in the competitive advantage for AGI in terms of size increment and both the companies’ manufactures are in China as well.

Another advantage may be that the successful acquisition would help in inventory management by Mercury and would result in the reduction in Mercury’s day sales inventory. Moreover, AGI can merge its women product line with Mercury casual footwear.

The inherent risks in this transaction:

The integration of Mercury and AGI is appropriate based on the projections made, but it shows some risk because AGI faced disadvantage in terms of competitive advantage due to its small size. In order to make the brand name, the company had to discount sales, which decreased the profit of the company. As a result, it received pressure from competitors and suppliers in the industry.

Are there any additional considerations that warrant should further investigate?

Further considerations should make those results in fair value of the acquisition that would show a potential to increase the sales, which ultimately lead to increasing the customer base and long-term growth rate. Along with this, he should consider the acquisition from stakeholder’s point of view, which would provide the manufacturing leverage and increase the exposure for retailers and other distributors.

2. Review and evaluate the projections formulated by Liedtke. Are they appropriate? What specific modifications would you recommend and why?

Firstly, he assumed the women’s product line should be closed after the acquisition. It might be a right assumption because the company faced loss in 2007 due to women’s line of product. This would also help to acquire it at some lower price.

He assumed that the company’s operating income would increase by 8.34%, 2.25%, and 8.88% for men’s athletic, men’s casual, and women athletic respectively. Based on the historic data, this assumption might be appropriate, but it seems to be very optimistic that would lead to higher firm value due to high free cash flow of firm.

The overhead expenses to revenue ratio would be aligned with historic average growth. This assumption requires some modification because after the integration, the women’s product line would be closed, this would reduce the overhead expenses and the sales will also decline.

Mercury Athletic Footwear Case Solution

There will be no requirement for separate financial statements for Mercury. This is totally appropriate, as this is the acquisition of another company and the financial statements would be prepared combine..........................

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Mercury Athletic Footwear: Valuing the opportunity Harvard Case Solution & Analysis