Mercury Athletic Footwear: Valuing the Opportunity
Course: MBA 643
Executive summary
, In this paper I sought to determine whether Mercury would be a viable acquisition for AGI. AGI
has a niche in casual wear while Mercury specializes in athletic wear. Both companies belong to
the apparel industry and have comparable revenues and identical business processes as well. An
acquisition of Mercury by AGI would enable AGI to diversify their footwear products and as a
result boost their revenues as they tap into the new markets originally owned by Mercury.
Additionally, an acquisition of Mercury would augment AGI’s market share in manufacturing
leverage. To determine the enterprise value, I worked out Mercury’s free cash flows for the next
five years using the discounted cash flow approach by basing on Liedtke’s projections given in
exhibit 6. I obtained the enterprise value to be $367,850 and recommended that AGI go ahead
and acquire Mercury at the enterprise price.
Assumptions were used to identify the risk free rate to be used in calculating the cost of equity
under the CAPM model, I based my rate on a U.S treasury bill with 5 year maturity.
Yeah, Mercury is an appropriate target for AGI. AGI has a niche in in classic casual footwear
that is aimed at affluent urban and suburban family members aged 25 to 45. Mercury on the other
hand has a niche in men's athletic footwear that is mainly aimed at youths aged 15 to 25 years.
Therefore by merging efforts, AGI would be able to capture a new market base that they hadn’t
tapped into yet which would significantly boost their sales. Additionally, AGI is much smaller
than its competitors and is at a disadvantage when it comes to securing Chinese manufacturers
who favor larger companies that guarantee them longer production runs. As a result, AGI has
been under continuing pressure from suppliers and competitors due to its small nature. However,
with the acquisition of Mercury- an already big company in terms of operations and revenues
AGI would augment its leverage to the suppliers and obtain an upper hand against its
Course: MBA 643
Executive summary
, In this paper I sought to determine whether Mercury would be a viable acquisition for AGI. AGI
has a niche in casual wear while Mercury specializes in athletic wear. Both companies belong to
the apparel industry and have comparable revenues and identical business processes as well. An
acquisition of Mercury by AGI would enable AGI to diversify their footwear products and as a
result boost their revenues as they tap into the new markets originally owned by Mercury.
Additionally, an acquisition of Mercury would augment AGI’s market share in manufacturing
leverage. To determine the enterprise value, I worked out Mercury’s free cash flows for the next
five years using the discounted cash flow approach by basing on Liedtke’s projections given in
exhibit 6. I obtained the enterprise value to be $367,850 and recommended that AGI go ahead
and acquire Mercury at the enterprise price.
Assumptions were used to identify the risk free rate to be used in calculating the cost of equity
under the CAPM model, I based my rate on a U.S treasury bill with 5 year maturity.
Yeah, Mercury is an appropriate target for AGI. AGI has a niche in in classic casual footwear
that is aimed at affluent urban and suburban family members aged 25 to 45. Mercury on the other
hand has a niche in men's athletic footwear that is mainly aimed at youths aged 15 to 25 years.
Therefore by merging efforts, AGI would be able to capture a new market base that they hadn’t
tapped into yet which would significantly boost their sales. Additionally, AGI is much smaller
than its competitors and is at a disadvantage when it comes to securing Chinese manufacturers
who favor larger companies that guarantee them longer production runs. As a result, AGI has
been under continuing pressure from suppliers and competitors due to its small nature. However,
with the acquisition of Mercury- an already big company in terms of operations and revenues
AGI would augment its leverage to the suppliers and obtain an upper hand against its
