Adidas and Reebok: Merger and Acquisition (M&a)

Competitors in the industry can wreak havoc on the bottom line for a company. With rivals, a price competition usually ensues, which benefits the customers but hurts the competing businesses that share a common strategy. In reviewing rival sellers, many competitors exist within the sports apparel and footwear industry, but most of them are unable to compete with the industry giants, Nike and Adidas. They are well seated in the industry and their sales reveal this ultimate strength, however, Under Armour is putting pressure on these mammoths. In 2015, global sales of sports clothing and footwear equated to $250 billion, of which Nike grabbed $30.6 billion, Adidas held in its grasp $18.8 billion and Under Armour had a much smaller piece of the pie, at $3.9 billion globally. In reviewing these numbers, it looks like Under Armour is really subpar to the industry giants, but this is not exactly the case. Under Armour in the past couple of

The goals of mergers range from reducing the number of competitors, to access of new products (Belcourt et al., p 330). Statistics show that 80% of new product developments fail (Howells, 2011), partly due to challenges and conflicts with human resources functions. Mergers and acquisitions are the fastest way to enter new markets. “It is estimated that 1/3 of all mergers fail due to faulty integration of diverse operations and cultures,” (Chhinzer, 2013). Therefore, the success of a merger or acquisition lies in the ability to guide, motivate, retain, and effectively use

Mergers and acquisition plays an important role in survival/vitalization of a corporation in today’s market. It continues to be a breakthrough strategy for improving innovation of a company’s product or services, market share, share price etc.

Many organizations will either experience a merger or acquisition to try to absorb the costs during unstable market times. Mergers and acquisitions to employee’s usual mean staff reductions and major changes, especially for an acquisition which, is when another company purchases a company and becomes a new company. (McClure, 2016)

Footwear and apparel have eight categories: running, basketball, soccer, women’s training, men’s training, action sports, sportswear and golf. Equipment refers to bags, socks, sport balls, eyewear, digital devices, etc. The global brands that Nike owns are Jordan Brand, Hurley Brand and Converse Brand, they are very well established. This broad range of products and product types is one of the reasons that Nike has maintained its high position in the market, in that it appeals and has appealed to a larger and more varied selection of customers. Adidas currently has three brands under the Adidas group: Adidas, Reebok and Taylormade; the different brands address the different types of consumers. Both Adidas and Reebok brands have a strong market share. However, Taylormade has a low market share, and therefore is not benefiting Adidas to the full of its potential, especially when compared to Nike’s Converse brand which by itself owns 2% of the brand share of dollars (Figure 1). Under Armour also has a broad range of product differentiation which is broken into four major segments: apparel, footwear, accessories and connected fitness. Despite their broad differentiation, Under Armour does not currently own any brands. Overall, Nike has a broader and more established range and brands that help Nike stay ahead of its

NIKE’s positive net income growth rate is heavily impacted by items reported under “Other Income”. One component of “Other Income” consists of the foreign currency conversion gain/ loss that NIKE sustains. As a global retailed the impact of foreign currency transactions is unavoidable. The net effect of foreign currency is driven up by a gain of $26 million dollars for fiscal year 2016 which is significantly less than the $147 million reported for fiscal year 2015. This is a result in the volatility of the global economy. The subsequent increase of $114 million in “Other Income” reported due to a legal judgment related to a bankruptcy case in Western Europe for fiscal year 2016 as well as unrealized gain and loss on securities and other income.

In 2005, Adidas the renowned footwear company from Germany was in a raging war with it’s U.S competitor Nike over market share in the field of football footwear and accessories. In the war over market share Adidas acquired Reebok the prominent company in basketball footwear to further gain a share in the U.S. Nike has also gained a lot of grounds in the field of football footwear by it’s aggressive marketing and sponsoring strategy that included the Brazilian national team and other prominent football clubs like Manchester United among many others. Nike strategy paid off and in 2003 Nike edged over Adidas for the first time ever in the European football market with a 34 percent market share against a 30 percent for Adidas.

Issues investigated in this report will be discussed neutrally and objectively. However, there are still numbers of limitations in this report due to many factors. First of all is the biasness of the information collected from the interview of employees in the company. These information may not be neutral and trustworthy; or even misleading. Also, lacking of time is another limitation of this report. Since this consulting report is conducted within a limited time, the consultant cannot address all issues but major points preventing the merger goes smoothly. In addition, financial issues, which can also be a factor

Even mergers and acquisitions with high combination potential were more successful with robust organizational integration efforts (Larsson & Finkelstein, 1999). Malhotra and Sharma (2013) mentions that financial gain is often the crux of the matter when merger and/or acquisitions are considered. Corporations hardly consider the impact on the employees and related human resources changes, issues or outcomes. People and indeed their compensation is mostly placed in a marginal position with most of the due diligence done around financial and strategic planning.

With the ever changing economy many companies today must evaluate strategies and practices to allow for optimum diversification and financial success. With the changing the marketplace organizations may turn to mergers and acquisitions to further diversify their business portfolio and expand their reach within the community. As organizations merge there are many variables that need to be considered, namely the employees which are the most important asset of both entities.

In fact, the associate chairmen of the two firms had just agreed in the opportunity and the necessity of joining their forces, while at the same time they either neglect or avoid discussing, enlightening and deciding upon both the deeper, crucial differences in terms of heritage, culture or vision and the several ongoing functional or operational details. The lack of communication and diffusion of the new elements, factors and directions is obvious both through the internal context of each firm -the employees are really unaware and uninformed- and through the overall, general dimension of collaboration and interaction between the two firms. In few simple words, the merging process is characterized by a major lack of perceived mutuality and essentially no sense of real synergy between the two sides.

The sale will include the brands and subsidiaries Salomon, Mavic, Bonfire, Arc’Teryk, and Cliché. Herbert Hainer, adidas-Salomon Chairman and CEO, stated that “Salomon has been a great member of our group. However, we have decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market as well as the growing golf category” (Bloomberg). This move will allow adidas to rid itself of the recently slumping Salomon brand, which posted a 1 percent drop in revenue along with a 74 percent drop in operating profit in 2004. The sharp decrease in operating profit is due to recent restructuring that reduced French production of Salomon products from 55 to 35 percent with new production taking place in Romania and China. News of the sale spiked adidas’ shares up 9.2 percent, reaching its highest point in six years, while Amer Sports shares gained 7.6 percent.

The acquisition of Reebok International Ltd. will strengthen its business portfolio especially in footwear, apparel and golf equipment industry as Adidas core competences. The Reebok acquisition would boosted Adidas’s revenue approximately $11 billion in 2005 and would make convinced improvement to catch Nike that

Adidas’ business model is represented in a variety of aspects. Those of which will be discussed include technology, sell channels, customers, ability to innovate and geography. The technological advances in the last ten years means Adidas are more accessible to customers than ever before. Customers are able to shop online as well as on their smartphones causing a surge in demand. This in turn affects their suppliers. Adidas need to invest more in suppliers to keep up with higher demand. This means opening more stores, and Adidas have plans to expand worldwide by 2020, as well as factories to produce their products. Growth in technology has a profound effect on Adidas’ business model.

As you can tell from this financial statement, The Adidas group has been on a successful track for quite awhile. Net sales between 2014 and 2015 grew a whopping 16.7%, as did the cost of sales by 16.5%, which puts the overall gross marginal change of The Adidas Group at 16.9%. This took the overall gross profit from €5,303 million to €6,202 million in just one year. The Adidas Group states, “In March 2015, we presented the next five-year strategic business plan for the Adidas Group. 'Creating the New ' is the attitude that leads us into the future. We believe that sport has the power to change lives. We work every day to inspire and enable people to harness the power of sport in their lives. We also translate our competence in sports into streetwear and fashion because sport is an attitude and a lifestyle. Everything we do is rooted in sports. At the very heart of 'creating the new ' are our brands. Our brands are what connect us with our consumers; therefore, the success of our brands defines the success of our business. With 'Creating the New ', we will get closer to them than ever before. To achieve that, our plan is based on three strategic choices: