K’s Kayak v. Great Outdoor Adventures
Confidential Facts for K’s Kayak
You represent K’s Kayak, (KK), a small retail store specializing in kayaks, rafts, and related outdoor and whitewater sports gear and supplies. KK’s owner is anxious to expand by opening a second store, and eventually plans to become a regionally recognized seller with multiple stores.
Recently, KK heard that Great Outdoor Adventures (GOA) is planning to liquidate its kayaking and rafting stock and continue with just the camping and hunting portion of its business. GOA is located in a nearby city, and its entire “water” inventory, with a wholesale value of about $400,000 is for sale. GOA has agreed to meet with you to try and negotiate the sale.
KK has examined the inventory and believes that much it would be highly marketable. It contains $200,000 in kayaks and rafts. Fifty percent is new stock and state-of-the-art. Twenty-five percent is a year or so older, but still in modest demand. Twenty-five percent is outdated and would be very difficult to sell. In addition, there are kayak and rafting accessories valued at $100,000, fifty percent of which are the latest and most desired technology. Finally, there is $100,000 of related equipment that retails well to customers looking at kayaks and rafts. This equipment normally is marked up 100% above the wholesale price.
It is clear to K’s that the stock is generally marketable and, if acquired, would support K’s plans for expansion. Additionally, KK knows that a new wave and kayak park is being planned for construction in the city where GOA is located. It would be the perfect location to start the second store. The park construction starts in one month, and will take three months to complete. Without the stock from GOA, opening a new store will take at least six to nine months due to the backlog in merchandise delivery, essentially causing KK to miss the first season of the new kayak park. Both stores handle the same brands, so...
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