The case uses the possible acquisition of mercury fit as a vehicle to educate pupils fundamental dcf (discounted cash flow) valuation using the weighted average cost of capital (wacc. Mercury background 2003 - acquired by west coast fashions (wcf) attempted brand extension through apparel line business stalled mercury ceo eager to return exclusively to footwear four footwear product lines men’s/women’s athletic men’s/women’s casual 2006: revenue - $4311 million ebitda . Mercury athletic slides - download as powerpoint presentation (ppt / pptx), pdf file (pdf), text file (txt) or view presentation slides online. Mercury athletic: valuing the opportunity is a harvard business (hbr) case study on finance & accounting , fern fort university provides hbr case study assignment help for just $11 our case solution is based on case study method expertise & our global insights.
Mercury athletic footwear ashutosh dash firm value & cash flow unlevered free cash flow • fcf = ebit (1-t) + dep - ∆nwc - capex or • fcf = ebit (1-t) - ∆nfa - ∆nwc. mercury athletic footwear group 7 contents executive summary & overview of problems 3 analysis on mercury acquisition 4 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 has 4 major product lines: men’s and women’s athletic and casual footwear men’s athletic footwear is the leading product for mercury athletic women’s casual footwear is mercury’s worst performing product that is may help agi to achieve a lower acquisition price. Case analysis: mercury athletics footwear: valuing the opportunity case solution estimation of the business under three different scenarios in this case, the analyst asked to draw three separate scenarios and to forecast the performance of the company.
Discounted cash flow model on mercury athletic footwear the model our group has used for the valuation on mercury athletic footwear is a dcf model mainly based on the 5-year revenue forecast and balance sheet projection done by liedtke our group uses two-stage growth model, including first 5-year stage and the following stable growth stage and we will introduce concepts such as wacc. Mercury athletic footwear: valuing the opportunity active gear, inc (agi) is a privately held footwear company and is contemplating the possibility of acquiring mercury athletic footwear west coast fashions inc , a large designer and marketer of men’s and women’s branded apparel recently announced that it plans to shed its mercury. An overview of the problem john liedtke, the head of business development for active gear, inc wanted to acquire mercury athletic, footwear division of wcf active gear had recently increased its supplier concentration to improve its negotiating position because agi’s small size was becoming a competitive disadvantage. John liedtke, the head of business development for active gear, a mid-sized athletic and casual footwear company, saw the potential acquisition of mercury as a unique opportunity to roughly double the size of his business.
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. 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. We believe mercury athletic footwear is an appropriate mark for agi to accomplish such a end for following grounds first of all this acquisition would non be dearly-won since agi and mercury portion several similar features in footwear industry. Athletic footwear mercury advantage department revenue of each department men’s casual women’s athletic women’s casual 219,093 51,663 123,563 36,802 051 012 029 009 q2 awacc assumption: d 0 d 20% d e rd 6% documents similar to mercury athletic footwear case solution mercury athletic. 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 mercury athletic footwear we will write a custom essay sample on mercury athletic with 2006 revenue of $431 1 million, mercury athletic represents a similar market share in the mature, highly competitive industry which is used in conjunction with wacc to calculate a terminal value in 2011. Mercury athletic footwear discussion materials for additional coverage of the topics please see your professor or e-mail me at jheilprin[email protected] Background of mercury athletic footwear agi and mercury are dealing in the similar industry/products (strategic fit) both of the companies’ manufactures is located in china, it will help agi overcome the competitive disadvantages.
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. Mercury athletic footwear: valuing the opportunity active gear incorporated -founded in 1968 by daniel fiore mercury should agi purchase mercury are the projections formulated by liedtke appropriate calculations -producer, designer and distributor of branded athletic and casual footwear -targeted. Footwear brands, styles, and specialty use (athletic, casual, dress, etc) have their own customer base a company specializing in one type of footwear would have a market characteristic particular to that footwear’s performance. 06% 12% key takeaways there is a lot of various within the small range of growth rate and waccsensitivity analysis 0% 360978 287871 259839 239334 long term growth rate 278% 3% 4% 505776 523852 632434 365682 374335 422402 318816 325130 359217 286576 291491 317569 8% 10% wacc.
As active gear wants a target debt-to-ev in market value of 20% for mercury athletic footwear, the wacc is 1071% lastly, it was necessary to compute the terminal value for that purpose we used the perpetuity formula to calculate the ev as of the end of 2011 and then discount it. In january 2007, west coast fashions, inc, a large designer and marketer of branded apparel, announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, mercury athletic.
Mercury athletic footwear 2007 2008 2009 revenue $ 479,329 $ 489,028 $ 532,137 operating expenses $ 423,837 $ 427,333 $ 465,110 corporate overhead $ 8,487 $ 8,659 $ 9,422 ebit $ 47,005 $ 53,036 $ 57,605 tax $ 18,802 $ 21,214 $ 23,042 noplat $ 28,203 $ 31,822 $ 34,563 depreciation $ 9,587 $ 9,781 $. Wacc=cost of debt1-tax ratedebtvalue+cost of equity(equityvalue) mercury athletic footwear: valuing the opportunity active gear, inc (agi) is a privately held footwear company and is contemplating the possibility of acquiring mercury athletic footwear west coast fashions inc, a large designer and marketer of men’s and women’s. Mercury athletic: valuing the opportunity case solution,mercury athletic: valuing the opportunity case analysis, mercury athletic: valuing the opportunity case study solution, when pupils have the english language pdf of this brief case in a coursepack, they are going to moreover have the option to obtain an audio version in the.