Mercury Athletic Footwear
Mercury Athletic Footwear
Overview
Active Gear, Inc. is a privately held footwear company with $470.3 million in revenue in 2006, making it relatively small compared to big players in the athletic and casual footwear industry. Eyeing an opportunity for growth via a bolt-on acquisition, John Liedtke, head of business development for the company, is looking into acquiring a subdivision of West Cost Fashions, Inc., Mercury Athletic. With 2006 revenue of $431.1 million, Mercury Athletic represents a similar market share in the mature, highly competitive industry. Liedtke believes the acquisition would help nearly double Active Gear’s revenue, and is confident that West Coast Fashions will be approaching Active Gear soon with an offer. Preempting analyst calculations and the West Coast offer, Liedtke wants to perform his own analysis of the potential acquisition.
Financial Analysis
To begin the analysis, we examine both companies’ historical financial data to get a better idea of their respective financial health. We can see that Athletic Gear’s revenue growth has been positive, but minimal. Though there are a number of reasons why this could be occurring, one option may be that the company is struggling to increase market share. The company does enjoy some large profit margins, though 2006 saw many of the margins dipping slightly. After a drop in both RNOA and ROE in 2005, the company has managed to increase both though not to levels seen previously. All in all, Athletic Gear seems to be a company that is profitable, but stalled.
Mercury Athletic on the other hand appears to be a rising star within the industry. With revenue growth of 20.16% in 2006 alone, the company has clearly been expanding its market share in the industry. The last year also saw increases across all company profit margins, though these margins are lower than Athletic Gear’s. After taking a hit in 2005, RNOA and ROE have somewhat bounced back and the company’s ROE is
Overview
Active Gear, Inc. is a privately held footwear company with $470.3 million in revenue in 2006, making it relatively small compared to big players in the athletic and casual footwear industry. Eyeing an opportunity for growth via a bolt-on acquisition, John Liedtke, head of business development for the company, is looking into acquiring a subdivision of West Cost Fashions, Inc., Mercury Athletic. With 2006 revenue of $431.1 million, Mercury Athletic represents a similar market share in the mature, highly competitive industry. Liedtke believes the acquisition would help nearly double Active Gear’s revenue, and is confident that West Coast Fashions will be approaching Active Gear soon with an offer. Preempting analyst calculations and the West Coast offer, Liedtke wants to perform his own analysis of the potential acquisition.
Financial Analysis
To begin the analysis, we examine both companies’ historical financial data to get a better idea of their respective financial health. We can see that Athletic Gear’s revenue growth has been positive, but minimal. Though there are a number of reasons why this could be occurring, one option may be that the company is struggling to increase market share. The company does enjoy some large profit margins, though 2006 saw many of the margins dipping slightly. After a drop in both RNOA and ROE in 2005, the company has managed to increase both though not to levels seen previously. All in all, Athletic Gear seems to be a company that is profitable, but stalled.
Mercury Athletic on the other hand appears to be a rising star within the industry. With revenue growth of 20.16% in 2006 alone, the company has clearly been expanding its market share in the industry. The last year also saw increases across all company profit margins, though these margins are lower than Athletic Gear’s. After taking a hit in 2005, RNOA and ROE have somewhat bounced back and the company’s ROE is