Mercury Athletic Footwear: Valuing the Opportunity Case Solution

While considering whether or not Mercury is an appropriate target for the Active Gear Incorporated AGI, different qualitative aspects need to be analyzed.

Mercury athletic footwear

Mercury athletic footwear was acquired by the West Coast Fashion in late 2003. WCF has acquired Mercury during its strategic expansion plan. Mercury had revenues of $431.1 million and EBITDA of $51.8 million during 2006. It has four lines of products, which include Men and Women casual and athletic footwear. The sales and distribution are made through large distributors and departmental stores. The company also uses some discount retail stores and specialty and sports retail stores. The production facility is in China. Moreover, the most unprofitable line product is women casual footwear.

Active Gear Inc.

Active Gear Inc. (AGI) was formed in 1965; the core business of the company isto produce high quality standard sports shoes mainly for golf and tennis players. However,as the company developed it expanded into the family casual footwear market in 1970s. Nonetheless,athletic shoes and footwear remain the core business of the company since a large portion of revenue comes from the sales of athletic products. During 2006, the revenue for the company was $470.3 million, whereas the operating margin was $60.4 million. The sales and distribution are made through the network of wholesalers and independent distributors. It also uses sales representatives that sell the products through some specialty athletic footwear stores and sports retail stores. Moreover, the company also uses manufacturers in China for its manufacturing work.

Is Mercury an appropriate target for AGI?

In order to analyze the basics, first of all both Mercury and AGI are dealing in the same segment of business that is athletic and casual footwear. Both have many similar operating strategies such as both use Asian manufacturers for the production of their products. Moreover, the distribution and sales lines have similar characteristics with some differentiation. Both the companies have a good brand image in the industry and have many established products.In addition to this, AGI can enhance its visibility in the market and it can achieve higher growth rate due to this acquisition.

By mergers of both companies, many advantages and synergies are possible. AGI can enhance its competitive advantage and can improve many aspects of Mercury such as its Days sales in inventory. Moreover, by acquiring Mercury it can double its revenue as estimated in the case.

Mercury has an established brand image and it is more focused on the younger generation. It has flexibility in its products and has diversified customer class with extreme sports enthusiastic to casual wearers. Mercury has been offering its products at lower and middle class with little focus on higher class with high quality product such as extreme sports shoes. On the other hand, AGI is more focused on the family footwear which comprises of customers age d25-45. Thus this age range also includes the young generations. Moreover, based on the pricing strategy,AGI’s pricing strategy is similar to the mercury, since it also targets market with middle and high class products. However, the products of AGI are more focused with lifestyle design...................

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