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Allen Edmonds sold...should we be worried about a decline in quality? - Page 2

post #16 of 24
Quote:
Originally Posted by Blackhood View Post

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.

There are actually lots of other ways to increase the profitability of a business that you acquire. You can get increased efficiency by combining similar functions. This most obviously applies to sales and marketing, which is why those people are often the ones laid off after an acquisition. But there are also other possibilities. You might be able to place bigger, consolidated orders for materials and get a better deal from your suppliers. You might be able to gain efficiency by using a single distribution network for the combined products of the bigger, combined company. Etc.

post #17 of 24

None of us knows what AE's books looked like.  Maybe there are areas for operational efficiency where a PE firm can take out costs without sacrificing quality, or maybe there are market expansion opportunities (going upmarket? although this seems unlikely) that require additional capital to explore. My gut however would be that they're going to trade off of brand recognition and lower cost/quality points to extract value and flip.  High-end men's shoes doesn't strike me as a huge growth area for a stuck-in-the-middle player like AE - too expensive for your J&M guy but without the cache of the C&J/EG/JL crowd.  Cache takes time to build while costs can be cut pretty easily.

 

Isn't this what happened, more or less, to the other legacy American brands like Bostonian, Florsheim, J&M, etc.?

post #18 of 24
What are the chances that this new PE firm will take AE public? Till this point they have remained a private entity, yes? Hopefully they at least don't cross that threshold just yet...
post #19 of 24
Mr. Grangaard was one of the executives in charge when his investment firm purchased AE about 7 years ago. After a short period of time the then existing CEO resigned. Mr. Grangaard was named acting CEO on a temporary basis until a successor could be found. During his tenure he saw the growth potential and enjoyed running the company so much that he asked off the board to become the permanent CEO. The board granted his wish. He has been committed to growing the company with a strong emphasis on "Made in America". Recently AE has been attempting to raise money to use for the further growth of AE. That's why news was released regarding talks with MWH. My suspicion told me that that was not going to happen. If you read Mr. Grangarrd's comments while that was hot news, he consistently stated that they were looking at several options in terms of raising money for further growth. Last week a deal was announced jointly by AE and their now new owners. Part of the agreement was that Mr. Grangaard and his management team would stay on to continue running the company.

Look how it worked out:
The original investment firm profited 10's of millions of dollars and re-couped their original investment in a 7 or 8 year period.
Mr. Grangaard was able to gain the cash he needed in order to pursue further growth while continuing to run the company. The new investment firm invested in a company that has been growing at a steady pace since he has been CEO. And they are poised for further growth. No doubt this was an excellent transaction for all interested parties including the consumer.

For those that subscribe to the belief that AE will move off-shore or sell off the parts for profit, that could not be further from the truth or their intent. Although we have all seen that happen countless times before that's not the scenario or the philosophy behind this transaction. AE will be around and continue to grow stronger for many many years.

Dismantling the company? No way.
A possible IPO? Maybe.

Read between the lines......
post #20 of 24
^That makes a good deal of sense. It never occurred to me that the CEO was a PE exec previously. I suppose it would make sense for him to leverage his contacts rather than just get a big loan to fund expansion.

I'd still be interested in how they will provide value to the PE short-term. If the company is already at the point where it is most efficient then the PE wont see return until new markets are explored. If it is not at maximum efficiency (too higher wastage, inefficient infrastructure etc.) then the PE guys wont stand for it for very long.

Seems like the CEO is in a nice position to bridge the PE vs Company gap, which bodes well.
post #21 of 24
Quote:
Originally Posted by Nick V. View Post

Mr. Grangaard was one of the executives in charge when his investment firm purchased AE about 7 years ago. After a short period of time the then existing CEO resigned. Mr. Grangaard was named acting CEO on a temporary basis until a successor could be found. During his tenure he saw the growth potential and enjoyed running the company so much that he asked off the board to become the permanent CEO. The board granted his wish. He has been committed to growing the company with a strong emphasis on "Made in America". Recently AE has been attempting to raise money to use for the further growth of AE. That's why news was released regarding talks with MWH. My suspicion told me that that was not going to happen. If you read Mr. Grangarrd's comments while that was hot news, he consistently stated that they were looking at several options in terms of raising money for further growth. Last week a deal was announced jointly by AE and their now new owners. Part of the agreement was that Mr. Grangaard and his management team would stay on to continue running the company.

Look how it worked out:
The original investment firm profited 10's of millions of dollars and re-couped their original investment in a 7 or 8 year period.
Mr. Grangaard was able to gain the cash he needed in order to pursue further growth while continuing to run the company. The new investment firm invested in a company that has been growing at a steady pace since he has been CEO. And they are poised for further growth. No doubt this was an excellent transaction for all interested parties including the consumer.

For those that subscribe to the belief that AE will move off-shore or sell off the parts for profit, that could not be further from the truth or their intent. Although we have all seen that happen countless times before that's not the scenario or the philosophy behind this transaction. AE will be around and continue to grow stronger for many many years.

Dismantling the company? No way.
A possible IPO? Maybe.

Read between the lines......

on the other hand, they have been fiddling about with a lot of cheaper, fugly, and just plain unusual models lately. I understand the need to expand the market, but bright blue suede mcneils?

AE is a conservative business shoe. I think they should expand on that...possibly even with a line above the independence collection.

Also, this entrance into clothing has been a total bust.
post #22 of 24
Quote:
Originally Posted by Dashaansafin View Post

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

Not sarcastic at all. It's SOP for VC.
http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?pagewanted=all
post #23 of 24
Quote:
Originally Posted by Reevolving View Post


Not sarcastic at all. It's SOP for VC.
http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?pagewanted=all

There are two possibilities that immediately come to mind here. In one case, we have journalists who know next to nothing about what actually happened writing a story designed to further their anti-capitalist point of view. Or we could have several firms of very smart people intentionally making bad business decisions because they know that they can get another firm of very smart people to take over the results of their bad business decisions. Based on my experience, one of these two options is much more likely than the other.

post #24 of 24

:lurk: !!!!!!!!!!!!!!!!!!!!!!!

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