11/7/2013 · 11/7/2013 7 • acquire new products / brands • move brands into new markets using...
TRANSCRIPT
11/7/2013
1
Lessons from the Trenches: Mergers and Acquisitions The Wolverine Worldwide Story - A Credit Department Perspective
Jim Bianculli
November, 2013
$888.9 $991.9 $1,061.0 $1,141.9 $1,199.0 $1,220.6 $1,101.1 $1,248.5
$1,409.1 $1,640.8
$2,720.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Guidance
Thru its history, Wolverine Worldwide has grown organically and
thru acquisition
2
2009 - 2013 EPS excludes the impact of non-recurring restructuring, other transaction charges and integration expenses.
Revenue ($ millions)
$0.85 $1.09
$1.33 $1.52
$1.77 $1.90 $1.77
$2.17
$2.48 $2.29
$2.78
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Guidance
EPS adjusted*
2013 represents the mid-point of our reported guidance range.
10-Year Revenue and EPS Growth Trends
11/7/2013
2
Wolverine Worldwide has had a global presence since 1959
• 65% of Wolverine’s unit
volume came from outside
the U.S. prior to the acquisition of PLG in
2012
• Office locations in London,
Montreal, Hong Kong and
Mumbai
• Joint ventures in India and
Colombia
• The company utilizes a
network of nearly 200 third
party licensees and
distributors
• Brands distributed in over
200 countries and territories
3
4
Wolverine Worldwide had its beginnings in 1883 – The company
was founded by G. A. Krause as a utility company.
In 1903, Krause built a shoe factory in Rockford, Michigan,
followed by a tannery in 2008. The family-run company was
renamed Wolverine Shoe and Tanning Company in 1921.
1883 1903
11/7/2013
3
5
1883 1958
In the 1950s, the company experimented with soft suede casual
shoes, and the Hush Puppies brand was developed organically
as a result. Production started in 1958 and the brand was an
instant hit.
Wolverine was strictly a US presence until 1959, when a Canadian
company was licensed to produce and sell Hush Puppies in
Canada. Thus began WWW’s affiliate network of international
distributors and licensees, now numbering over 200.
6
The company was renamed Wolverine Worldwide in 1964, and
first traded on the NYSE in 1965
1883 1958 1964
11/7/2013
4
7
1883 1958 1964 1969
In the early 1960s, the Bates Shoe Company began making military dress shoes for the United States Navy. Bates was acquired by Wolverine in 1969. Today, Bates’ entire business is making footwear for military, police and other uniformed public services.
8
The 90s were a time of significant change for Wolverine Worldwide: licensing
agreements with CAT (1994) and Harley Davidson (1998) for footwear, the
acquisition of Merrell, a key brand, and Hush Puppies expansion into Europe
The 1997 acquisition of the Merrell brand was significant – Wolverine Worldwide
grew Merrell over the next several years and it became WWW’s largest selling and most profitable brand
1994 1995 1997 1996 1999 2000 1998 1883
U.K.
11/7/2013
5
9
In the decade beginning in 2001, Wolverine Worldwide acquired Sebago (2003),
Chaco and Cushe (both 2009), added several Track ‘n Trail retail stores, and entered
into a licensing agreement to produce Patagonia footwear (2006)
In addition to growth in Canada, Wolverine Worldwide also acquired the European
Caterpillar and Merrell businesses, which created the company’s first owned wholesale businesses in Europe
1994 1995 1997 1996 1999 2001 2002 2003 2000 2004 2005 2006 2009 1998 1883
Europe
U.K. Canada
Europe
10
The Wolverine Worldwide portfolio expanded significantly
in October 2012 with the acquisition of the Performance +
Lifestyle Group from Collective Brands
With 16 footwear brands and approximately 100 million pairs
annually, we are now one of the largest non-athletic footwear
companies in the world
1994 1995 1997 1996 1999 2001 2002 2003 2000 2004 2005 2006 2009 1998 1883
Europe
U.K. Canada
Europe
2012
11/7/2013
6
11
New Brand Operating Groups
HERITAGE
GROUP
LIFESTYLE
GROUP PERFORMANCE
GROUP
2012 Acquisition
• By far, WWW’s biggest acquisition yet
• Sales 90% US / 10% International
– Doubles size of US portfolio • Many common customers
– Tremendous opportunity to expand the new brands internationally
• Significant integration challenges
– Different enterprise systems
– Multiple new operating hubs
– Duplicate functions – or are they?
– Different processes
12
11/7/2013
7
• Acquire new products / brands
• Move brands into new markets using existing distribution channels
• Acquire new employees with diverse skills
• Inherit operating systems and processes
• See different approaches to similar tasks – Move closer to Best in Class
– Possible talent upgrade
• Synergies and leveraging opportunities
13
Benefits of Acquisition
• Incompatible corporate cultures
• Integration failures (systems, operations, workforce, customers, etc.)
• Not identifying and obtaining synergies
• Treating entire department as “back office” – Need to maintain relationship with customers
– Need connection to sales and commercial teams
– Historian – “This is how and why it was done”
• Expecting instantaneous synergies – May be some increased costs before savings are realized
14
Acquisition Risks
11/7/2013
8
• Eliminate duplication – Examples
• Review need for multiple office building sites, distribution centers, etc.
• Review all service and supply contracts, leases, etc. for consolidation / leverage
• Eliminate duplicate roles / common activities
– Multiple functional leaders / similar job functions
– Identify common customers in combined portfolio and reallocate assignments – no need for multiple touches
• Efficiencies / Critical Mass Opportunities – Examples
• Utilize excess capacity, warehousing, existing distribution channels, etc. for new brands
• Negotiate more favorable rates for service contracts due to increased combined volume
• Adopt most efficient processes or redesign processes to be more efficient
• Move transaction processing activities and/or related functions to shared service center
• Revisit outsourcing options
15
Synergies / Leveraging Opportunities
Company should be prepared to address customer requests to share synergies such as price reductions for combined larger volumes…or requests for best payment terms across all brands
16
Note:
MBB = Michigan Based Brands
BBB = Boston Based Brands (newly acquired)
WWW’s Global Credit Presence Following 2012 Acquisition
11/7/2013
9
17
Note:
MBB = Michigan Based Brands
BBB = Boston Based Brands (newly acquired)
WWW’s Global Credit Presence 2014 Plan
Consolidate in London
Maintain some credit professionals in Lexington,
move some functions to Rockford Sort out
Deductions and New Accounts
– Credit policy
– Work flow, procedures and processes
– Credit scoring / risk assessment
– Monitoring customer account activity
– Treatment for collections and disputes
– Automated cash application opportunities
– Multiple invoice delivery systems and payment formats
– Invoice accuracy
– Effective deductions management
– Comprehensive credit controls
– Managing bankruptcy claims
18
Review the credit function
This is an appropriate time to improve credit policy, procedures and processes and move even closer to “best practices”
11/7/2013
10
Power of the Portfolio