MGMT S-2720
Assignment 1: Mercury Athletic Footwear
Questions:
1. Is Mercury an appropriate target for AGI? Why or why not?
2. Review the projections by Liedtke. Are they appropriate? How would you recommend modifying them?
3. Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections.
4. Do you regard the value you obtained as conservative or aggressive? Why?
5. How would you analyze possible synergies or other sources of value not reflected in Liedtke’s base assumption?
1. Is Mercury an appropriate target for AGI? Why or why not?
Yes, we believe Mercury is an appropriate M&A target for AGI and should be pursued.
The Footwear Industry is a competitive business. We can
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Mercury’s parent company then branched out to complementary line of apparel products. With poor performance, Mercury is being sold off.
• Mercury does not discriminate its sales channels. It is sold in department stores, specialty retailers, wholesalers and independent distributors. A small percentage is sold through website and other sources
• Mercury manufacturers the footwear in China.
Possible synergies from the acquisition of Mercury:
• Increase in sales by using the same sales channels, offering more styles, and increase presence in new markets for AGI products.
• Increase production efficiency by consolidation in manufacturing facilities. With a higher production volume, the new AGI might be able to negotiate for lower cost from different suppliers and manufacturers.
• Increase in logistics efficiency. The combined company would be able to combined the logistics for both company, decreasing overhead and possibly offer more efficient distribution and logistic support.
• AGI has a higher profitability margin, and can thus potentially increase Mercury’s financial performance.
• AGI and Mercury’s respective brands target different customers markets. The combined company would have opportunities to gain new customer segments to the combined products.
2. Review the projections by Liedtke. Are they appropriate? How would you recommend modifying
1. Do you think Mercury is an appropriate target for AGI? Why or why not?
Mercury Athletic Footwear Valuing the Opportunity [Author] CASE ANALYSIS Mercury Athletic Footwear Table of Contents 1. Is Mercury an appropriate target for AGI? Why or why not? ............................ 3 2.
* Same industry/similar products, and Mercury does their manufacturing in China (Pg 4) like AGI, so Mercury would increase the leverage with contract manufacturers (Pg 1), which helps since AGI does most of it’s manufacturing in China, and China just had a recent wave of consolidation among Chinese contract manufacturers which gave the Chinese more leverage over AGI (Pg 3)
Increase the frequency of purchases by your customers. No matter how poor your current product or service, you must have some customers or clients. One key strategic dimension that you should be thinking about is how to augment and reposition your product in order to sell more to this group.
In estimating the value of Mercury we can use a discounted cash flow (DCF) approach or a comparable firms’ multiples analysis. In using the DCF approach we have to make some assumptions in our analysis along with using data generated in the industry and in Liedtke’s projections.
Finally, we can calculate the NPV of these cash flows as the enterprise value of Mercury, which is $375,402,473.
For instance, certain seafoods are known to have high concentrations of mercury. The same can be found inside of certain dental fillings, such as silver fillings or mercury amalgrams.
• Expand the limited advertising program for current niche market products to retain and gain market share.
This manager’s report provides a financial performance review of the business operations for athletic footwear industry’s Elite Feet for production Years 11 through 18. Included in the report are trends in company’s annual total revenues, earnings per share (EPS), return on equity (ROE), credit rating, stock price and image rating. Additionally reported are the strategic vision for the company, performance targets for the aforementioned production years plus the next two years, the company’s competitive strategy as well as production strategy, finance strategy and dividend policy. Also discussed is a look at the company’s closest competitors and the actions that could be
* More people will be exposed to the product. This will lead to greater sales. This will also improve brand equity. Through this positioning strategy Paramount will have a razor in each segment.
As already stated, many other locations around the world are affected by mercury poisoning and contamination. For example, Canada and Japan have an extensive history of mercury poisoning, including neurologic symptoms and contaminated fish. These studies have has been documented since the 1950’s in these locations. In fact, the contamination became so problematic the Ontario health department formed a task force on organic mercury in 1972. Further, recent protesting throughout Toronto has asked for Canada to address the contamination of mercury. Findings revealed levels of mercury exceeding those of international standards and included the highest recorded mercury contamination among in the western part of the world. (CITE 6)
The move to the state-of-the-art facility will result in the organization being more efficient and will as well result in quicker pull of inventory and quicker shipment. Furthermore, stock will be handled more efficiently with less errors resulting in higher profits for the organization.
In this paper further information on this heavy metal will be discussed including background information on mercury contamination, analytical techniques used to test for it, its causes and effects, and a case of mercury contamination in Miami.
c. Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections.