business strategy game analysis

Topics: Debt, Credit rating, Corporate finance Pages: 3 (424 words) Published: December 12, 2013

Memorandum

To: Exotic Footwear Board of

From: CHT Partners

RE: The State of The Company

Date: December 12th, 2013

Exotic Footwear had an excellent current ratio in years 17 and 18, has had an A+ credit rating since year 15, and was the runner up for the Gold Star Award for corporate citizenship in year 14. Also, there was never a year when Exotic Footwear’s earnings per share was below 0. However, there are some issues that require your attention. •

Exotic Footwear has continually failed to meet investor expectations


Exotic Footwear has significant operational inefficiencies


Lots of inventory/days in inventory way too high


Underperforming the market



In order to overcome these hazards, we have provided the following recommendations •
Engage in a sell-side M&A process to find a strategic or a financial buyer


divest


Management-led Leveraged Buyout


Strong credit rating, Can take on debt


Low image rating means an opportunity to reinvent


Low stock price

Because of our position in the industry (cite SGM), we believe that we are not in a position to merge or buy another company. It is clear that our company is not distressed because of our current ratio, credit rating, cash flows. In addition to tangible financials, we can add value to an acquirer because of our endorsements and strong wholesaling business unit. We have assembled a list of potential acquirers and are approaching their management teams, as shown in figure (cite and do). we selected companies based on their values, size, and ability to finance the acquisition.

A management-led leveraged buyout of Exotic would both be feasible and practical. Because of our high credit rating (A+), we can borrow at 4.5%. We are able to meet the obligations of the payments because our global unit sales have increased over time, and because we have consistently been profitable. Ability to pay for the debt is not reason enough...
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