Acquisition of Reebok by Adidas

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Extended Essay

Acquisition of Reebok by Adidas

RESEARCH QUESTION:

To what extent has the acquisition of Reebok International Ltd. by Adidas Group been effective as a growth strategy?

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Abstract

This essay responded to the research question “To what extent has the acquisition of Reebok International Ltd. by Adidas Group been effective as a growth strategy?”An analysis of secondary data such as income statements and annual reports of years 2004-2007 was conducted on Adidas Group to evaluate revenue patterns before and after the acquisition. Furthermore, the interview with the assistant strategic manager of Adidas-Reebok Company was done to find out the extent of the merger’s growth. To find the extent of growth, the essay conducted SWOT analysis and financial and performance analysis of Adidas before the merger and similar analysis of the Adidas-Reebok merger after the computer literacy. This will facilitate the introduction of the ICT curriculum in the college that is can be comprehended by the Dubbo teaching staff. The acquisition. The tools that were considered in financial and performance analysis included the cash flows, sales, market stock prices, and net income. From the SWOT analysis and the financial analysis of the company, it was evident that Adidas has grown to a significant extent. Similarly, the paper explored several growth indicators after the analysis shows that the project was entirely beneficial. The major areas of expenditure for the project were on transport, acquisition of Reebok international limited by Adidas Group to measure whether there had been declining or inclining growth and whether it was substantial, mediocre, or insignificant. The growth indicators discussed included the cost of synergies, financial economies, economies of scale, an increase of market share, and the stock performance of the merger. Through the analysis of the growth indicators, the essay showed that Adidas-Reebok Company benefited from the cost of synergies, increased financial economies and economies of scale, increased its market share to 20% globally and has traded healthily in the stock markets. The essay also highlighted some of the challenges the merger had faced and they include hindrance in financial growth, lack of control and coordination, poor working relationships, and external diseconomies of scale. The essay was then summarized by a conclusion.

Total Word Count=290

Table of Contents

Abstract 1

Table of Figures 3

1.0 Introduction 4

2.0 Methodology 5

2.1 Primary research 5

2.2 Secondary research 5

3.0 Company background 5

4.0 Analysis of Adidas and Adidas-Reebok 7

4.1 SWOT analysis 7

4.1.1 SWOT analysis of Adidas before acquisition 7

4.1.2 SWOT analysis of Adidas-Reebok Merger 8

4.2 Financial and performance analysis 13

4.2.1 The financial and performance analysis of Adidas before the acquisition of Reebok 13

4.2.2 The financial and performance analysis of Adidas-Reebok Merger 15

5.0 Growth indicators after the acquisition of Reebok international limited by Adidas group 19

5.1 Synergies through acquisition 19

5.2 Financial Economies 22

5.3 Economies of scale 24

5.4 Increase of market share 25

5.5 Stock market performance of Adidas-Reebok merger 26

6.0 Challenges to the acquisition growth strategy in Adidas-Reebok Company 27

7.0 Conclusion 28

8.0 Bibliography 29

9.0 Appendices 32

9.1 Appendix 1 32

9.2 Appendix 2 33

9.3 Appendix 3 34

9.4 Appendix 4 35

9.5 Appendix 5 36

Table of Figures

Figure 1 13

Figure 2 15

Figure 3 15

Figure 4 17

Figure 5 18

Figure 6 20

Figure 7 26

1.0 Introduction

McCarthy (2013)[1] defined acquisition as the process of the takeover of a company, in which a company buys almost all or most of the ownership stakes of the target company to get control. The process entails buying and a selling strategy to rapidly grow a company by taking over the firm’s niche and operations. The process of acquisition is one of the growth strategies of a company and is more beneficial than internal expansion. This is because, through acquisition, the company will take advantage of the synergies, lower risks, integrate easily, get easier financing, get economies of scale, expand its market share and distribution channels and eliminate its competitors. The main purpose of acquiring a firm according to Finkelstein et al (2010)[2] is to take over the new business areas and finance the operations of the acquired firm in the same industry under one umbrella. The merged firms have many advantages as opposed to single firms operating individually in the market since both companies will combine their operations, human resources, research and development facilities, finance, and managerial team and operate as one entity.[3] Acquisitions are paid through acquiring the stocks of the target company or in cash, or both. Adidas group acquired Reebok international limited in 2005. Both companies were operating in the sports footwear and apparel industry. While Reebok was based in the United States, Adidas group was a German based company. Nike Inc was the global market leader, followed by the Adidas group and Reebok third. Therefore, the acquisition of Reebok international ltd by the Adidas group was bound to make tremendous changes in the market place. Even though the acquisition of Reebok by Adidas group was for strategic growth, the merger has progress although faced numerous challenges likewise, hence the research question “To what extent has the acquisition of Reebok International Ltd. by Adidas Group been effective as a growth strategy?

2.0 Methodology

Relevant secondary & primary data will be extracted from the two sporting goods companies, and the findings will be explored and evaluated. Secondary sources will consist of online articles and annual reports before and after the acquisition occurred.

2.1 Primary research

(1) Interview with assistant strategic manager of Adidas-Reebok Company, Robert Magill.

2.2 Secondary research

  1. Adidas Group Annual Report
  2. Reebok International Ltd. Annual Report
  3. Online article of acquisition
  4. Relevant textbooks, Newspapers, Magazines

3.0 Company background

Recently in the modern business world, organizations have found it to be exceedingly important to adopt external growth strategies by merging, taking over, and acquiring foreign firms either vertically or horizontally. Acquisitions have been substantially implemented in growing markets such as the sports industry. This involves the case of UK Company, Reebok being acquired by German-based parent company Adidas Group on May 6th, 2006.[4] The acquisition was a strategic maneuver to gain a higher market share, to achieve a larger extent of economies of scale, and to diversify their products. Adidas Group would now be able to sell a wider product segment as Reebok was initially specialized in meeting the needs of “team” sports whereas Adidas were specialized in meeting the needs of “individual” sports. The two firms that complimented each other would have the chance to compete with market leaders, Nike.

In 2005, both Adidas-Salomon and Reebok reached an agreement where Adidas- Salomon acquired Reebok. The deal shaped the apparel and footwear industry since Adidas-Reebok currently controls 20% of the market although still behind the main competitor Nike which is value to be $145 billion globally.[5]

Smit (2008)[6] noted that the transaction also brought together other brands of Reebok like the Greg Norman and Rockport line of golf apparel, and other lines of Adidas such as TaylorMade apparel business and golf equipment and Salomon ski franchise

The shares of Reebok went at $59 for a €3.2 billion offer. This also included net minorities and cash, with a €3.1 billion transaction value.[7] The annual synergies cost was estimated to be €125 million.[8] According to Adidas AG (2014),[9] Reebok was a world leader in athletic apparel and footwear with an estimated €820 million in operating profits and €8,899 million in sales. The company had strong positions and better balanced three main regions; Asia 15%, North America 35%, and Europe 46%.[10]

4.0 Analysis of Adidas and Adidas-Reebok

4.1 SWOT analysis

4.1.1 SWOT analysis of Adidas before the acquisition

Strength

  • Strong brand name
  • Top market position
  • Diversified operations geographically

Weakness

  • Low inventory turnover
  • Poor margins

Opportunities

  • The growing global market of footwear
  • Healthier lifestyles adoption
  • Sponsorship agreements

Threats

  • Many legal risks
  • Counterfeits
  • The rising raw material costs[11]

4.1.2 SWOT analysis of Adidas-Reebok Merger

Strength

The acquisition of Reebok by Adidas led to some strength for the companies. The first strength is that the merger concentrates on the production of diversified products to different consumer markets. Furthermore, due to research and upgrade of the merger, there has been an increase in product lines of Adidas and Reebok products. Furthermore, the large global market of the merger and the increased shares for Adidas-Reebok after the acquisition is strength.[12] David (2007)[13] indicated that Reebok sells wholesale while Adidas is premium. Therefore, their merger has acquired the lower, middle, and upper-level markets globally. Lastly, the other strengths of the merger are the sharing of human resources, the methodology of operations, skill set, the expertise of the employees, research, and development between the companies.[14] Other strengths include:

  • It has a strong health care sector. The act of patenting medical innovation team in its research and development with links to other research partners like Waseda University (Tokyo), the University of Michigan, and the University of Loughborough.
  • Adidas-Reebok has a stronghold in the soccer industry
  • It has no bad reputation like environmental pollution or child labor
  • In its distribution channel, It has strong control
  • Variety and diversity of products offered online such as sporting equipment, apparel, and footwear among others
  • Reputation and recognition of its two brands (Adidas and Reebok) in addition to its 2400 worldwide stores in different regions.
  • The strong management team from both Reebok and Adidas
  • It is the biggest sponsor in several events such as UEFA and FIFA competitions, Olympics, NBA, and other sports personalities like Reggie Bush and David Beckham.[15]

Weakness

The biggest weakness identified by Fireman (2005)[16] has been the sizes of the two companies and the complexity of the process of acquisition. Both Adidas and Reebok had huge productions and global markets and their management has been a challenge. Moreover, before the merger rolled out an appropriate strategy of disposing of the goods, there was a wastage of goods. Lastly, the merger has been slow in streamlining the workforce of both two companies since the acquisition since the management profiles of both Adidas and Reebok were different.[17] The questionable quality of its products has also been raised since the company outsources 97% of Adidas global production from Asian third-party manufacturers to reduce production costs.[18] Other weaknesses according to DePamphilis (2007)[19] include:

Opportunity

Reduction of Operations costs has been a great opportunity for the merger in areas such as the manufacturing units, and costs of research and development. Moreover, the acquisition has reduced the competition in the market since the major competitors are Nike and Puma.[20] According to Peng et al (2007),[21] Adidas-Reebok merger has been very much flexible in promoting their product’s brands, and this can be amplified by using celebrities like the start athletes for Adidas-Reebok to promote the brand. Lastly, the merger should adopt diversified marketing strategies to promote the Adidas-Reebok brand. Other opportunities for the merger according to Gaughan (2006)[22] include:

  • Invest in e-commerce or outsource a web developer
  • Collaborate with established online retailers to sell its products
  • Increase female participation in sports
  • Global sponsorship of sports events to boost its brand worldwide
  • The revival and gradual growth of Reebok in recent years.[23]

Threat

According to Kaplan (2010),[24] cannibalization has been the biggest threat to the Adidas-Reebok company. Before the merger, both companies had huge markets and brands. However, after the merger, the market of penetration of an unpopular brand in a market formerly dominated by another partner brand has been difficult. This has resulted in cannibalization of the unpopular products hence reducing the market share. Similarly, a similar merger in the future between puma and Nike is a big threat to the Adidas-Reebok merger. Another threat is if the Adidas-Reebok merger concentrates on the market share of one particular company because it can result in spoiling their merger’s reputation. Other threats highlighted by Begg (2006)[25] include:

  • Increasing challenges on the export and import of its products duties
  • Negative images from the companies sponsored athletes, for instance, the sexual assault case by Kobe Bryant
  • The strong reputation from its main competitor, Nike in the apparel and footwear industry

4.2 Financial and performance analysis

4.2.1 The financial and performance analysis of Adidas before the acquisition of Reebok

The net sales of Adidas from continuing operations in 2004 were € 5.9 billion,[26] and the attributable net income to shareholders from discounted and continuing operations was €314 billion.[27] Peng et al (2007)[28] indicated that since 2001 after the new management took over, the price of the shares more than doubled. Moreover, in 2005 the dividends increased by 30% to € 1.30.[29] Figure 1 indicates the first quarter of 2004 and 2005 of Adidas, Salomon, TaylorMade-Adidas golf in 2005

Figure 1

According to Adidas (n.d),[30] Adidas divested in Salomon business and this increased its profitability. Moreover, the company recorded in 2005 global growth trends that are impressive. For instance, in Europe, the sales of the first half-year (H1) grew by 1% on a neutral basis of currency in 2005.[31] Moreover, the excitement related to the world cup spurred growth from the second half (H2) of 2005 onwards. In North America, in H1 of 2005, the currency-neutral sales of Adidas grew by 18 %.[32] Buffoni (2013)[33] noted that Adidas also intensified its focus on profitability in the North American region. On the other hand, H1backlogs and currency-neutral sales in Asia increased by 30%.[34] Similarly, in Latin America, the H1 currency-neutral sales were u by 36%.[35] This was thirteen consecutive double-digit quarter growth. Figure 2 indicates the sales of the first quarter of 2004 and 2005 of Adidas-Salomon by region in 2005. Figure 3 indicates the Adidas backlog by category of product and region by March 2005. Refer to appendix 1 and 2 for the Income statement and net sales of Adidas-Salomon in 2004 and 2005

Figure 2

Figure 3

4.2.2 The financial and performance analysis of Adidas-Reebok Merger

Since the acquisition of Reebok by Adidas in 2006, the growth of Adidas has been reduced by Reebok. Fireman (2005)[36] observed that the sales of the Reebok brand declined for three consecutive years since its acquisition. The Reebok sales slumped by 26% in 2012[37] second quarter, hence reducing the revenue. The performance of Reebok was in sharp contrast to Adidas whose sales increased by 10% in 2012 to about 14.5 billion.[38] Figure 4 indicates the financial overview of the net sales by brand from 2009 to 2013.

Five-year Overview 2013 2012 2011 2010 2009

Figure 4

Smit (2006)[39] pointed out that initially Adidas forecasted the sakes of Reebok to be €3 billion in 2015 but lowered it to € 2 billion because of commercial irregularities in its Indian branch of Reebok. This cost Adidas approximately €200 million in restricting the operations in India. Furthermore, Nike the main competitor of Adidas replaced Reebok as the apparel supplier for the NFL in 2012.[40] This was because the contract was not in line with the new focus of Reebok on all fitness things. André (2013)[41] indicated that the termination of the contract resulted in a loss of sales in 2012 of approximately $200 million. Moreover, the forecast of the Adidas brand by 2015 will be €12.8 billion[42], and this will be a 5% increase from the projection in 2010 of €12.2 billion.[43] The other projections of business units of Adidas by 2015 include Reebok-CCM Hockey and Rockport €2.2 billion, up from €1.8 billion which was an initial focus in 2010.[44] Figure 5 indicates the net sales by product category from the year 2009 to 2013

Five-year Overview 2013 2012 2011 2010 2009

Figure 5

McCarthy (2013)[45] noted that Herbert Hainer, the Chief executive said that Reebok will come up with new products focusing on categories of fitness such as gym, running, cross-fit, keep-fit, dance, and yoga. The expected sales of Adidas sport-styles are also expected to increase by 2015 by €3.9 billion compared to €3.7[46] which was the initial forecast. The overall target of Adidas group sales by 2015 is €17 billion[47] with expected faster growth in the golf business and Adidas brand to offset Reebok’s weakness. Buffoni (2013)[48] observed that the projected operating profit margin of Adidas by 2015 would be 11%, since 2012 it was 8%, and in 2013 it was 9%.

Adidas AG (2014)[49] pointed out that this year may 2014 Adidas paid dividends of €1.50 per share. This represented a €314 million dividend payout with a 37.4% net income payout ratio attributed to the shareholders, Compared to the previous year of about 35.7 %.[50] Figure 6 indicates the dividend per share for Adidas-Reebok from 2006 to 2013. Refer to appendix 3 for income statements of Adidas-Reebok from 2009-2013, and appendix 4 for the income statement of first half-year and second quarter 2013/2014

Figure 6

From the SWOT analysis of Adidas before and after the acquisition, some factors indicate that the acquisition of Reebok Company by the Adidas group has led to its growth. For instance, through the acquisition, Adidas-Reebok has expanded its research and development team to ensure that its products are relevant to the market, and are produced according to the customers’ demand. Moreover, through acquisition, the company has increased its channels of distribution and this has ensured that its products reach a larger market than before. The merger has also grown its brands to the point that its two brands have gained more reputation and recognition. Growth has also been seen in the expanded management team from both companies merged

Similarly, from the financial analysis, it is evident that the Adidas-Reebok Merger has increased its net sales compared to the Adidas group in 2005 from 7520 to 11,059. This is an indication of growth. The dividends to the shareholders have also increased over a five year period from €0.42 to €1.50. The essay will from this point discuss the growth indicators of a merger and acquisition and relate them to the Adidas-Reebok merger to show its growth since the acquisition.

5.0 Growth indicators after the acquisition of Reebok international limited by Adidas group

The acquisition that occurred between Adidas Group and Reebok International Ltd. was an inorganic growth strategy to gain a larger concentration ratio in the industry.

5.1 Synergies through acquisition

The benefits a company can get after strategic acquisition are the results of economies of scale and synergies. In a well-executed acquisition, the buyer can take full advantage of the synergies. This means that the two merged companies will be more profitable and stronger than either of the companies before. DePamphilis (2007)[51] defined synergy as more or two things combined are more effective or better than the sum of their individual parts. For instance, the merger of the Adidas group and Reebok international limited combined their resources and had more than their individual values.

According to Finkelstein (2010),[52] the key to the company’s growth by acquisition is by utilizing the synergies. A company can expand and grow quickly, cheaply, and face fewer risks through acquisition,[53] Furthermore, it offers several; advantages such as instant economies of scale and easier financing. The competitive advantage of a merger is formidable and it catches its main competitors off guard, eliminates competitors, and also market penetrating to the areas the company was considered weak.[54] The acquisition of Reebok international ltd by the Adidas group was a strategic move for cheaper and quicker growth. The acquisition offered Adidas Company many advantages such as the expansion of its economies of scale and easier financing. The financial pool and assets of both companies are now at the disposal of the Adidas group. Furthermore, the acquisition provided Adidas-Reebok Company with a competitive advantage over other competitors such as puma and made the merger the second largest company controlling the global footwear industry.[55] Smit (2008)[56] pointed out that the acquisition took off guard the main rivals of Adidas such as Nike and Puma, and also enable it to penetrate more markets where Adidas was weak

Synergistic acquisition according to Kaplan (2010)[57] is not only limited to the acquisition of the direct companies. A company can acquire another company to take advantage of the distribution channels of each of the companies. For instance, Adidas acquired Reebok International Ltd and took advantage of Reebok’s already established channels of distribution. The Adidas products were being sold through the Reeboks distribution channels, and also Reeboks products through the Adidas distribution channels

The acquisition can also be done by acquiring a company in a different geographic area but in the same industry. Cost synergies are realized when some services or departments can be centralized between the two companies to gain the economies of scale through the volume of business increase.[58] This is also evident after the acquisition of Reebok by Adidas where they were in different geographical areas but the same industry. Buffoni (2013)[59] pointed out that Adidas-Reebok Company centralized some of its operations and services such as customer service to take advantage of the economies of scale because of the increase in business volume

The catalysts that drive may acquisitions of many businesses involve synergies. When many different companies merge, they become greater than when they are operating individually. The synergies that involve economies of scale and marketing has many benefits and opportunities that involve reduced overhead expenses, purchasing volume discounts, and production

5.2 Financial Economies

As much as organic growth or internal growth is better for a company, inorganic or external growth is good for the rapid expansion of a business.[60] It is often much harder to acquire financial assistance from financial institutions for quick growth projections. However, a company can grow by over 100% rapidly through acquisition.[61] However, as much as there are associated dangers with rapid growth for a company, in acquisitions they are less existent since the systems of handling the growth of the merger are always already established. Hollensen (2014)[62] indicated that as much as the systems may need some changing and tweaking to fit in with the companies procedures, but there is a higher likelihood that for a certain period of time they are serviceable and that it will be easy to make the adjustments to achieve the rapid growth of a company.

Similarly, for financing an acquisition, the financial institutions such as banks readily accept growth projections from acquisitions than the traditional modest growths. This is because the bankers make projections for a company based on the financial performance of the past as shown from the company’s financial statements. Moreover, as much as business plans are required before financing, the banks require tangible assets that they can get hold of if necessary. Furthermore, the bankers draw inferences of the companies past performance from analyzing the cash flows.[63]

The acquisition of Reebok by Adidas increased the assets and the financial economies of the merger. This has placed them in a better position for growth since they have easy access to financing their operations and for growth expansion. The financial economy of Adidas-Reebok has increased after the merger, and this has influenced its growth. It had an established system of handling its rapid growth plan, has tangible cash flows from both companies to indicate its creditworthiness, and to supports its growth projections based on the past impressive performance by the Adidas group.[64]

DePamphilis (2007)[65] elaborated that as much as a banker can easily finance a merger, the sellers themselves can provide some of the needed cash to the buyer for purchasing their company at lower interests through owner financing. Similarly, when the acquisition process takes place, the buying company also acquires the large customer base that is already established. The new customers to the buyer are new to the buyer but they will continue doing business with the acquired business which they have been buying goods from for many years. As much as Reebok did not finance its own acquisition, Adidas settled the agreed amount from its own means. However, the Adidas group bought a new loyal customer base of Reebok international limited. These customers have continued being loyal to products and the brand of Reebok and therefore, as much as Adidas group owns Reebok Company, the customer base of Reebok remains loyal to its brands.[66]

5.3 Economies of scale

In an acquisition, the economies of scale production are obvious since many benefits of scale will be gotten when the facilities of production increase their operations. However, McCarthy (2013)[67] pointed out that economies of scale come into play in areas such as production, professional expertise, administration, marketing as well as other areas. In Adidas-Reebok, the production increased from 50% to 85%. Additionally, Professional expertise, administration, and marketing from both companies had economies of scale.[68] Figure 7 indicates the number of employees from the year 2009-2013 in Adidas-Reebok Company.

Five-year Overview 2013 2012 2011 2010 2009

Figure 7

5.4 Increase in market share

The simple logical benefit of buying a competitor in the market is having fewer competitors after the purchase. In the shoe market, there are many several players in the industry with a few major players. However, after the acquisition of Reebok Company, Adidas reduced his number of competitors by one, and now controls 20% of the market share after Nike.[69] This was an effective growth strategy for the Adidas group.

The market share of a company that that has acquired another firm in the same industry can increase, with the accompanying influence in the market. According to Finkelstein et al (2010),[70] a firm with a formidable share of the market can make prices more confidently and other decisions in the business instead of responding to what others do in the market. Adidas-Reebok merger can increase their prices without losing their clients, and this will make them influence the market as other small firms in the market will also increase their prices. However, other smaller companies in the market cannot influence Adidas-Reebok to change its prices they increase theirs since they do not have economies of scale.

5.5 Stock market performance of Adidas-Reebok merger

André (2013)[71] observed that the share prices of Adidas and Reebok increased from the time the process of the merger was commenced until its completion. Adidas acquired Reebok’s stocks and the open market stocks also. For each Reebok’s share, Adidas paid $59[72] on the date of the merger. Moreover, in 2005 august 22nd, the stock of Adidas on the Frankfurt stock exchange rose by 7% from €147 to €158[73] just after one day. Similarly, in the New York stock exchange, the Reebok stocks rose by 30% by one day from $44 to $57 from 2nd to 3rd August 2005.[74]

Adidas shares also dropped by as much as 3% in Frankfurt trading at €64.91 on September 2012[75] this was a drop by 1.5% after gaining a 30% increase to about €65.76 in 2012.[76]

6.0 Challenges to the acquisition growth strategy in Adidas-Reebok Company

Even though the merger has seen significant growth in many areas, it has also seen challenges in sectors.

  1. Financial growth hindrance– the merger has faced a financial downfall in Reebok Company since its acquisition. This has hampered the growth of the Adidas group and necessitated the injection of more financial capital. The branch of Reebok in India had financial mismanagement in 2012, and their contract with the NFL was canceled making the company lose $400 million in total.[77]
  2. Lack of control and coordination– both countries operated a different line of products, were in different geographical locations also. There had been the problem of coordination and control since Adidas is new in the United States market, the uncertainty of the future of employees after the merger and change of management.[78]
  3. Poor working relationships– as much as the merger brought the two companies together, they were former rivals. Therefore, suspicion has prevailed between and this has led to poor working relationships.[79]
  4. External diseconomies of scale– these are factors beyond the mergers control and have increased their total costs. For instance, an increase in output in the industry, market prices, and an increase in raw materials costs.[80]

7.0 Conclusion

In conclusion, since the acquisition of Reebok international Limited by the Adidas Group, the company has grown and expanded in many areas. Adidas-Reebok currently controls 20% of the market after Nike Inc, the market leader. The merger has brought economies of scale, financial economies, and a large pool of human resources from the two firms. Moreover, the merger has taken advantage of synergy costs due to the merger and is recording improvement in sales. As much as the sales of Reebok has been slumping the growth of Adidas, the management has introduced expansion and product strategy to meet its target projections by 2015. The merger has also diversified its markets and products to suit all levels of the market from low, middle, and upper markets. Other growth that has been achieved due to the acquisition are wider brand recognition, trusted image, and reputation. However, the merger has also faced challenges in its operations such as regional specialization, hindrance in financial growth, lack of control and coordination, poor working relationships, and external diseconomies of scale

8.0 Bibliography

Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>

Adidas. n.d. <http://www.weblinksresearch.com.au.>

Adidas-Salomon AG SWOT Analysis. n.d. Business Source Complete. Munster: Datamonitor Plc. <http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%22BR5%22&scope=site&site=bsi.>

André Richelieu, and Michel Desbordes. 2013. “Sports teams and equipment manufacturers going international: The strategic leverage of co-branding”. Sport, Business, and Management: An International Journal. 3 (1): 63-77.

Begg, P. F. C. 2006. Corporate acquisitions and mergers: a practical guide to the legal, financial, and administrative implications. London: Graham & Trotman.

Buffoni, Franco. 2013. Adidas. Paris: Créaphis.

Coyle, Brian. 2000. Mergers and acquisitions. Chicago: Glenlake Pub. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=52734.>

David Rygl, M Kittler, and Tobias Dennerlein. 2007. The success of International M&As: The case of Adidas’ acquisition of Reebok. each.

DePamphilis, Donald M. 2007. Mergers, acquisitions, and other restructuring activities. Amsterdam: Elsevier/Academic Press. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=319671.>

Finkelstein, Sydney, and Cary L. Cooper. 2010. Advances in mergers and acquisitions. United Kingdom: Emerald. <http://site.ebrary.com/id/10445340.>

Fireman, P. 2005. “Back in 1991, Reebok’s CEO laid out the four essentials of global leadership. The payoff: In 2005, a $3.8 billion acquisition offer”. Directors & Boards. 30 (1): 16-16.

Gaughan, Patrick A. 2006. Mergers, acquisitions, and corporate restructurings. New York: John Wiley & Sons.

Hollensen, Svend. 2014. Global marketing. Harlow: Pearson Education.

Kaplan, Steven N. 2010. Mergers and productivity. Chicago: University of Chicago Press. <http://public.eblib.com/choice/publicfullrecord.aspx?p=408372.>

McCarthy, George D. 2013. Acquisitions and mergers. New York: Ronald Press Co.

Peng, Yangjun, Jiaojiao Chen, and Serena Narain. 2007. Adidas. Singapore: Page One

Smit, Barbara. 2006. Pitch invasion: three stripes, two brothers, one feud – Adidas, and the making of modern sport. London: Allen Lane.

Smit, Barbara. 2008. Sneaker Wars: the enemy brothers who founded Adidas and Puma and the family feud that forever changed the business of sport. New York: Ecco.

“SPORTS Reebok to turn up the volume – Reebok’s acquisition by Adidas has given it the muscle to make the sort of noise expected of a USD3bn brand”. 2006. Marketing. 24

9.0 Appendices

9.1 Appendix 1

9.2 Appendix 2

9.3 Appendix 3

Five-year Overview 2013 2012 2011 2010 2009

9.4 Appendix 4

9.5 Appendix 5

Interview between Bob Brian (BB) and Robert Magill (BM), the assistant strategic manager of a local distributor of Adidas-Reebok products on 24th September 2014 in Dubai

BB: Why did Adidas Group Acquire Reebok International Ltd?

BM: Adidas group acquired Reebok company to expand its operations and also as a strategy for growth

BB: Since the acquisition, Reebok has continued to record dismissal performance and burdening Adidas growth. Why the low performance

BM: Reebok has faced some financial difficulties and that’s a fact. Majorly it has been due to shifting in demand for other goods, their goods have been moving slowly, canceling of some major supply contracts, and also financial improprieties in some branches like the India branch in 2012.

BB: What has some of the growth Adidas has achieved since the merger in 2005?

BM: generally some of the growths include an increase in workforce, economies of scale, financial economies, synergy, increase in products and distribution channels, increase in market size, reduction of competitors, and increase in stock prices

BB: What are some of the challenges the merger has faced from 2005

BM: like any other merger, there have been numerous challenges to the company but the company has faced and tackled them well. First is the hindrance to financial growth. As you know the Reebok company has been performing dismissal, Adidas has to finance some of its operations to make it go. Another is a lack of control and coordination in the few years after the deal was complete. Both employees are to be incorporated, management realigned. This also led to poor working relationships because of suspicions and lack of trust. Lastly are the external diseconomies of scale from the market such as the government’s laws, prevailing political atmospheres, economic changes among others which the company has no control over.

BB: What are the core strengths of the company?

BM: the Adidas-Reebok merger has very many strengths such as strong research and development teams, stronghold in the soccer industry, efficient distribution channel, variety of products serving all market levels, two renowned international brands, strong management teams, and employees and effective corporate social responsibility among others

BB: Lastly, what is the future of Adidas-Reebok? Are there opportunities for the merger?

BM: as a company, we foresee significant growth in the future. Some of the opportunities the merger will take advantage of include the adoption of diversified market strategies to promote our brand. The company also plans to invest in eCommerce, for collaboration with established online retailers, increase female participation, and increase its global sponsorship of sports events.

  1. McCarthy, George D. 2013. Acquisitions and mergers. New York: Ronald Press Co.
  2. Finkelstein, Sydney, and Cary L. Cooper. 2010. Advances in mergers and acquisitions. United Kingdom: Emerald. <http://site.ebrary.com/id/10445340.>
  3. Gaughan, Patrick A. 2006. Mergers, acquisitions, and corporate restructurings. New York: John Wiley & Sons.
  4. Peng, Yangjun, Jiaojiao Chen, and Serena Narain. 2007. Adidas. Singapore: Page One.
  5. Buffoni, Franco. 2013. Adidas. Paris: Créaphis.
  6. Smit, Barbara. 2008. Sneaker Wars: the enemy brothers who founded Adidas and Puma and the family feud that forever changed the business of sport. New York: Ecco.
  7. Smit, Barbara. 2006. Pitch invasion: three stripes, two brothers, one feud – Adidas, and the making of modern sport. London: Allen Lane
  8. Ibid.,17
  9. Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>
  10. Ibid.,112
  11. Adidas-Salomon AG SWOT Analysis. n.d. Business Source Complete. Munster: Datamonitor Plc. <http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%22BR5%22&scope=site&site=bsi.>
  12. André Richelieu, and Michel Desbordes. 2013. “Sports teams and equipment manufacturers going international: The strategic leverage of co-branding”. Sport, Business, and Management: An International Journal. 3 (1): 63-77.
  13. David Rygl, M Kittler, and Tobias Dennerlein. 2007. The success of International M&As: The case of Adidas’ acquisition of Reebok. each.
  14. Ibid.,201
  15. Interview with the strategic manager, September 2014
  16. Fireman, P. 2005. “Back in 1991, Reebok’s CEO laid out the four essentials of global leadership. The payoff: In 2005, a $3.8 billion acquisition offer”. Directors & Boards. 30 (1): 16-16.
  17. “SPORTS Reebok to turn up the volume – Reebok’s acquisition by Adidas has given it the muscle to make the sort of noise expected of a USD3bn brand”. 2006. Marketing. 24.
  18. Ibid.,302
  19. DePamphilis, Donald M. 2007. Mergers, acquisitions, and other restructuring activities. Amsterdam: Elsevier/Academic Press. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=319671.>
  20. Smit, Barbara. 2008. Sneaker Wars: the enemy brothers who founded Adidas and Puma and the breast cancer. Ann has been a staunch Christian since childhood just like the rest of her family feud that forever changed the business of sport. New York: Ecco.
  21. Peng, Yangjun, Jiaojiao Chen, and Serena Narain. 2007. Adidas. Singapore: Page One.
  22. Gaughan, Patrick A. 2006. Mergers, acquisitions, and corporate restructurings. New York: John Wiley & Sons.
  23. Interview with the strategic manager, September 2014
  24. Kaplan, Steven N. 2010. Mergers and productivity. Chicago: University of Chicago Press. <http://public.eblib.com/choice/publicfullrecord.aspx?p=408372.>
  25. Begg, P. F. C. 2006. Corporate acquisitions and mergers: a practical guide to the legal, financial, and administrative implications. London: Graham & Trotman
  26. Hollensen, Svend. 2014. Global marketing. Harlow: Pearson Education.
  27. Ibid.,66
  28. Peng, Yangjun, Jiaojiao Chen, and Serena Narain. 2007. Adidas. Singapore: Page One.
  29. Ibid.,119
  30. Adidas. n.d. <http://www.weblinksresearch.com.au.>
  31. Ibid.,2
  32. Ibid.,3
  33. Buffoni, Franco. 2013. Adidas. Paris: Créaphis.
  34. Ibid.,34
  35. Ibid.,34
  36. Fireman, P. 2005. “Back in 1991, Reebok’s CEO laid out the four essentials of global leadership. The payoff: In 2005, a $3.8 billion acquisition offer”. Directors & Boards. 30 (1): 16-16.
  37. Ibid.,16
  38. Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>
  39. Smit, Barbara. 2006. Pitch invasion: three stripes, two brothers, one feud – Adidas, and the making of modern sport. London: Allen Lane.
  40. André Richelieu, and Michel Desbordes. 2013. “Sports teams and equipment manufacturers going international: The strategic leverage of co-branding”. Sport, Business, and Management: An International Journal. 3 (1): 63-77.
  41. Ibid.,65
  42. Ibid.,65
  43. Ibid.,66
  44. Ibid.,71
  45. McCarthy, George D. 2013. Acquisitions and mergers. New York: Ronald Press Co.
  46. Adidas. n.d. <http://www.weblinksresearch.com.au.>
  47. Ibid., nd
  48. Buffoni, Franco. 2013. Adidas. Paris: Créaphis.
  49. Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>
  50. Ibid.,217
  51. DePamphilis, Donald M. 2007. Mergers, acquisitions, and other restructuring activities. Amsterdam: Elsevier/Academic Press. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=319671.>
  52. Finkelstein, Sydney, and Cary L. Cooper. 2010. Advances in mergers and acquisitions. United Kingdom: Emerald. <http://site.ebrary.com/id/10445340.>
  53. Ibid.,391
  54. Gaughan, Patrick A. 2006. Mergers, acquisitions, and corporate restructurings. New York: John Wiley & Sons.
  55. Ibid.,151
  56. Smit, Barbara. 2008. Sneaker Wars: the enemy brothers who founded Adidas and Puma and the breast cancer. Ann has been a staunch Christian since childhood just like the rest of her family feud that forever changed the business of sport. New York: Ecco.
  57. Kaplan, Steven N. 2010. Mergers and productivity. Chicago: University of Chicago Press. <http://public.eblib.com/choice/publicfullrecord.aspx?p=408372.>
  58. Begg, P. F. C. 2006. Corporate acquisitions and mergers: a practical guide to the legal, financial, and administrative implications. London: Graham & Trotman.
  59. Buffoni, Franco. 2013. Adidas. Paris: Créaphis.
  60. Coyle, Brian. 2000. Mergers and acquisitions. Chicago: Glenlake Pub. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=52734.>
  61. Ibid.,49
  62. Hollensen, Svend. 2014. Global marketing. Harlow: Pearson Education.
  63. Ibid.,127
  64. Smit, Barbara. 2006. Pitch invasion: three stripes, two brothers, one feud – Adidas, and the making of modern sport. London: Allen Lane.
  65. DePamphilis, Donald M. 2007. Mergers, acquisitions, and other restructuring activities. Amsterdam: Elsevier/Academic Press. <http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=319671.>
  66. Adidas-Salomon AG SWOT Analysis. n.d. Business Source Complete. Munster: Datamonitor Plc. <http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%22BR5%22&scope=site&site=bsi.>
  67. McCarthy, George D. 2013. Acquisitions and mergers. New York: Ronald Press Co.
  68. Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>
  69. Ibid.,73
  70. Finkelstein, Sydney, and Cary L. Cooper. 2010. Advances in mergers and acquisitions. United Kingdom: Emerald. <http://site.ebrary.com/id/10445340.>
  71. André Richelieu, and Michel Desbordes. 2013. “Sports teams and equipment manufacturers going international: The strategic leverage of co-branding”. Sport, Business, and Management: An International Journal. 3 (1): 63-77.
  72. Ibid.,68
  73. Ibid.,69
  74. Ibid.,69
  75. Ibid.,70
  76. Ibid.,70
  77. David Rygl, M Kittler, and Tobias Dennerlein. 2007. The success of International M&As: The case of Adidas’ acquisition of Reebok. each.
  78. “SPORTS Reebok to turn up the volume – Reebok’s acquisition by Adidas has given it the muscle to make the sort of noise expected of a USD3bn brand”. 2006. Marketing. 24.
  79. Fireman, P. 2005. “Back in 1991, Reebok’s CEO laid out the four essentials of global leadership. The payoff: In 2005, a $3.8 billion acquisition offer”. Directors & Boards. 30 (1): 16-16.
  80. Ibid.,16