Friday, April 20, 2012

Nike's Merger and Acquisition Strategies



Being a company that is continually seeking out sources of competitive advantages, Nike has historically implored merger and acquisition strategies when the proper alliances present themselves.  The main reason Nike implements these plans is to ultimately create economic value in its exploitation of the competitive opportunities that a target firm creates for the company, which in turn increase the economic profits for its shareholders.  Nike also implements this strategy to gain market power in product markets and to take advantage of the potential above-normal profits a merger and acquisition can create.

In its existence, Nike has acquired only targets that are strategically related to its existing markets further diversifying their economies across a wider breadth of product offerings.  Predominantly venturing into product extension and horizontal mergers to do so.  Nike's first acquisition was in 1988 when it acquired Cole Haan that gave the company access into the upscale footwear market.  In 1994, Nike acquired hockey product giant Bauer, but subsequently sold this subsidiary in 2008.  Nike then waited almost a decade before its next acquisition which was surf apparel firm Hurley International in February 2002.  However in the 2000s, Nike (like many U.S. companies during this time) was very active in its acquisition projects.  In July 2003, Nike horizontally acquired former basketball shoe competitor Converse and its established Chuck Taylor All Stars sneakers.  In August 2004, Nike leapt into horizontal acquisitions again with the purchase of Starter, but turned around and sold it in 2008, the same year as Bauer.  2008 was not all about downsizing for Nike though, as in the March of that year Nike acquired soccer apparel titan Umbro.  

Currently, Nike owns four key subsidiaries (Cole Haan, Hurley, Converse, and Umbro) but I would not be surprised if Nike continues expanding on their merger and acquisition/diversification strategy.  With reported free cash flows increasing substantially over the past decade (from $575.5 million in 2001 to $4.5 billion in 2011: an appreciation of about 680%), Nike has an awful lot of reserves at its disposal for future merger and acquisition plans.

12 comments:

  1. People or organizations seeking to sell their business, may not be aware of the whole process of mergers and acquisitions. They could search for services of well-known merger and acquisition professionals. These professionals will assess the pros and cons of the company, value the resources, work out a lowest cost and also recommend about techniques that could improve selling cost. When the ultimate choice is taken, the professionals get in touch with audience. They may also provide support on tax benefits.

    Merger and Acquisition

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    1. Most definitely. Consulting firms make a living off these strategies and can prove very beneficial for companies looking to expand. Said companies are often boggled down with their own day to day operations that they really can't devote their mental capacities on these issues, so yes I do agree that if able, consultants are worth their weight in revenues.

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  2. Thanks for above information ,i am very much helped by these mergers and acquisitions business strategies, i know other will definately find cure of thier problems regarding this.

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  3. Hi Josh B. Thank you for sharing your thoughts on nike!
    As we are currently working on a project about nike regarding the management of multinational companies, your information is very helpful. We would be really thankful if you please could tell us your sources or link us more information. Thank you very much! Greetings from Germany :)

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    1. Hello my German friends! Unfortunately this post was written so long ago that I hate to say I no longer have my research notes handy. BUT there are plenty of sources out there, you just have to read inbetween the lines and you can easily make out their "positions". Good luck!

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  4. When we use the term
    "merger", we are referring to the merging of two companies where one
    new company will continue to exist. The term "acquisition" refers to
    the acquisition of assets by one company from another company.
    Business Valuation

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  5. If your company has been through an acquisition or merger, you already know that the different cultures of the companies involved always make the situation challenging. In hostile takeovers, it can prove devastating. Employees often find that the behaviors previously rewarded by their company can sometimes result in demotion or dismissal. JCF Capital Advisors LLC, JCF Capital Advisors

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  6. One of the most recognized sports companies has been offering a pack of benefits to authorized employees at NIKE. At Nike, they support teammates with healthy benefits to realize their full potential. To select and get a Nike employee benefits package, please visit the nikebenefits ehr.com website, and log in to your Nike Benefits.

    Foot Locker INC Employee Benefits

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  7. Nice shoes now i am going to buy them. Thank you for posting this blog for us.you can also check our article about:nike branding strategy

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  8. Thanks for sharing. Especia is one of the top mergers and acquisitions consulting firms, Business combination & restricting Services firms in India with presence in Noida, Delhi, Gurgaon, NCR & other regions in India. The Merger and acquisitions process is also a big point of concern for the companies involved in the deal, as the process could be full of risk and uncertainty. However, prior effective planning and research could make the process easy and simple. if you need Merger and acquisition services call 9310165114 or visit us Merger and acquisitions services

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  9. The demand for expert accountant services in Surat has been steadily increasing due to the city's booming economy.

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