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Allen Edmonds sold...should we be worried about a decline in quality?

post #1 of 24
Thread Starter 
Just saw that Allen Edmonds was sold and got a little worried. Begs the question: Does quality always suffer when a iconic brand is sold?

http://www.jsonline.com/business/allen-edmonds-sold-headquarters-to-stay-in-port-washington-b99135030z1-230562761.html
post #2 of 24
Thank you for posting this mikeynyc. I am rather suprised to read this and need to collect my thoughts.
post #3 of 24
Why should you immediately think that the worst will happen?
post #4 of 24

What makes you think AE had any quality before?

post #5 of 24
Quote:
Originally Posted by EMartNJ View Post
 

What makes you think AE had any quality before?

The several pairs of their shoes that I own and wear on a regular basis?

post #6 of 24
It was sold to a PE shop. What makes you think there would be a decline in quality?
post #7 of 24
Quote:
Originally Posted by Dashaansafin View Post

It was sold to a PE shop. What makes you think there would be a decline in quality?

As someone who once worked with PE funds on several deals, I can vouch for the fact that they can do things from time to time that many people probably wouldn't approve of.

 

On more than one occassion I was asked to run the numbers to see if they could shut down a potential acquisition profitably. If you're a manufacturer of circuit boards, for example, and have several design wins, you'll typically keep getting orders for those for at least a few years, so it can actually be profitable to lay off all engineering, sales and marketing, and keep just enough people to fill the incoming orders. If your manufacturng is off-shore, that's even easier. I dreaded doing this, and felt lucky that in every case it didn't make sense to pursue this strategy. In another case, we were looking at a company for nothing else than its corporate structure (tax-sheltered HQ off-shore, etc.) and really didn't care about what it actually made. 

 

So there can definitely be reasons to be wary about PE funds buying your favorite company, but in this case, I'm not too concerned. And that's as someone who has several pairs of AE shoes and plans to buy more in the future.  

post #8 of 24
Quote:
Originally Posted by Dashaansafin View Post

It was sold to a PE shop. What makes you think there would be a decline in quality?

biggrin.gif
post #9 of 24
MikeDT, can you comment? Chinese like Gucci, Prada, Armani and.... AE?

From the article:
Quote:
One of Allen Edmonds' plans has been to expand in China, hoping to appeal to that nation's growing middle class.
post #10 of 24
Yes, that is pretty much guaranteed to happen.
Do you know what private equity firms do?

That is why it was bought it the first place.
This is now a carcass that will be flogged for value and flipped.
Game over.
post #11 of 24
Only two reasons to sell a business:

1) It is so profitable that the board wants to cash out and retire.

2) It is so unprofitable that the board cannot fund it's decline.

Only one reason to buy a business:

1) To increase its profitably.


It seems unlikely that a PE firm would buy a business with an aim of improving profitability, and not have to streamline production by reducing fault tolerance or lowering material cost.
post #12 of 24

It was owned by a PE firm before this for the past ~5 years. Has seemed fine during that time.

post #13 of 24
lurker[1].gif
post #14 of 24
An AE executive used to post here - don't know if it was Paul Grangaard himself, but I'm curious if they're still active on the forum.

Although I imagine that he would be pretty busy these days...
post #15 of 24
Quote:
Originally Posted by Reevolving View Post

Yes, that is pretty much guaranteed to happen.
Do you know what private equity firms do?

That is why it was bought it the first place.
This is now a carcass that will be flogged for value and flipped.
Game over.

I hope this was sarcastic, otherwise you're a complete idiot.
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