(DEPARTMENT OF COMMERCE)

YAMUNA NAGAR-135001
Session (2020-21)

A
CASE STUDY
ON

ADIDAS AND REEBOK MERGER

Submitted To- Submitted By-
Mrs.Anshu Divya Devi
(Assistant Professor) M.Com 2nd Sem (Previous)
(Dept. of Commerce) Roll No: 20201530014
DHE: 220253168020
University Roll No…………

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 CONTENTS

 ABSTRACT

 KEY WORDS

 INTRODUCTION

 ABOUT THE COMPANY

 ABOUT THE CASE

 EVALUATION CRITERIA

 CONCLUSION

 REFERENCES

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 ABSTRACT

This report will analyse a case study of Reebok acquisition by Adidas and try to
find out merger aims and reason . The case discusses the proposed merger of
Reebok International Limited with Adidas Solomon AG.

It describes the recent trends and studies the ongoing merger in the sporting goods
industry.

The case presents the rationale behind the decision to merge.

Finally the case ends with a debate whether the merger would be successful.

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 ABOUT THE COMPANY

Adidas ,based in Herzogenaurach,Germany,is a global company active in the

supply of sports and leisure goods,includingfootware,apparel and
equipment,through its core brands ,Adidas and TaylorMade.Adidas has recently
sold the Solomon business segment to the Amer sports Corporation.The
commission approved the transaction.

Reebok ,based in canton ,U.S.A.,is a global company active in the design and
marketing of sports and fitness products,includingfootwear.Reebok also design and
market footwear and apparels for non-athletic use.

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Reebok is a global athletic footwear and apparel company, operating as a
subsidiary of Adidas since 2005. Reebok produces and distributes  fitness , running
and CrossFit sportswear including clothing and footwear. It is the official footwear
and apparel sponsor for Ultimate Fighting Championship, CrossFit, Spartan Race,
and Les Mills.

In 1958, Reebok was established as a companion company to J.W. Foster and

Sons, founded in 1895 in Bolton, Greater Manchester, England. From 1958 until
1986, Reebok apparel featured a Union Jack flag.

The global headquarters are located in Canton, Massachusetts, U.S. with regional

offices in Amsterdam, Montreal, Hong Kong, and Mexico City.

In November 2016, the company announced they would be moving their

headquarters location to Boston. The reasons for the move, according to the

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company, is to be located in an urban environment that is more desirable
to millennial workers and to “clarify the roles” of United States offices. The move
is set to be complete in the fall of 2018.

INTRODUCTION

Adidas Solomon AG on 3rd august 2005 announced its plan to acquire Reebok at an
estimated value of 3.1 billion .Adidas offer to pay 34.2% premium over last
closing price for Reebok share.This makes the deal very favourable for Reebok ,as
it was facing a tough competition from its rival firmAdidas , Nike and Puma and it
seems almost impossible to fight indedependently with their rival firms.In order to
compete with Nike ,which has very strong market share in North America and
globally .

This is an one-in-a-lifetime opportunity to combine two of the most respected and

well known companies in the worldwide sporting goods industry.

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 ABOUT THE CASE

Nike lead the US market as well as global market by giving a tough competition to
Adidas and Reebok which were competing for the second and third position.Nike
was the first choice of billion of peoplebecause Nike offers stylish lookwith quality
and is famous for its fashion status , colour and combination . While Adidas was
supposed to be known for its good quality and Reebok for its stylish look and
therefore it seems to be impossible for two brands to compete with Nike
independently.On the other hand Adidas was facing a tough competition from
Pumawhich was the number 4 in sporting goods brand.Puma had disclosedits
expansion plan through entering into new sportswear category.This seemed to have
definite effect on Adidas and Reebok market share..Thereforeinorder to compete
with nike and to achieve stronger position in the market Adidas and Reebok went
for a friendly merger .Group expected to earn higher return than cost of capital in
three year time.It expected to reduce its debt and improve its cash flow from
operational synergies.

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 KEYWORDS

Adidas Soloman AG ,

Reebok International Limited ,

Nike International Inc. ,Mergers and Acquisitions

Commission

,FinancialPeformance

,BargainingPower,

DistributionNetwork,

International issues

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 SWOT ANALYSIS

STRENGTHS:

 More products for different customers.

 Increase in product line.
 Now both middle and upper priced markets are covered.
 Shared R&D,Patents,technology& innovations.

WEAKNESS:

 Differing Values among management.

 Complexity of joining two corporate culture
 Both companies belonged to different countries.

OPPORTUNITY:

 Reduction in costs.
 Decreased competition
 Cross-over promotion by sponsored athletes
 Enter to new market/segment.

THREAT:

 Nike
 Nike’s possible acquisition of Puma.

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EXTENT OF MERGER SUCCESS

After the acquisition Adidas group Financial accounts show significant

improvement.Adidas sales revenue increases by 17% in euro terms.Financial aim
of the merger to reduce the operational cost throughsubstaintial operational
synergies seemed to be achieved as the firm had improved its gross and operating
profit margin after the merger.Adidas and Reebok sourcing activities as well as
underlying improvement in all segments.Adidas aimed to extend their global
reach.Merger’s aim to expand in Asia market and to generate more revenue from
Asia market seemed to succeed as the sales revenue from Asia market
improved.Company’s aim to compete with Nike in North America market didn’t
hit the target.Both the companies are complementary to each other.As Fireman
remarked,”Adidas is a perfect partner for Reebok.

Reebok’s mission is to enroll globl youth inclining towards the Music-and-lifestyle

image that it promotes through sports,music and technology.

This complements Adidas’s mission to be the leading sports brand in the

world,with a focus on performance and international presence.The new entity
would continue to have separate headquarters and their individual sales force.The
companies would also keep most of the distribution centers independent and would
have separate advertising programs for their brands.The brand has kept separate
because each brand has a lot of value and it would be stupid to bing them together.

The companies would continue selling products under respective brand names and
labels .Adidas declared that the deal would involve investment in both Adidas and
Reebok. These investments would guide both the companies in effective
consolidation.The combo of both the companies provided Adidas with $11.8
billion in the global market.Both the brands are the top most brands hence a merger

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like this will provide them with a better reputation and and more scope in the
global market with stronger existence.,more variety and range of products will be
available under the same company making the profit more than twice.

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 REFERENCES

1. http://management-case-studies.blogspot.com/2008/03/Adidas-Reebok-
merger-case-study.html
2. http://sports.espn.go.com/espn/columns/story?
3. http://www.businessweek.com/bwdaily/dnflash/aug2008/nf2008084_8340.h
tm visited 01-03-10
4. http://www.icrmindia.org/casestudies/catalogue/Business
%20Strategy/BSTR177.htm 01-03-10
5. http://www.Adidas-group.com/en/pressroom/archive/default.aspx

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 CONCLUSION
Adidas and Reebok merged together to compete with Nike in Northen
America and to increase their sales revenue and reduce operating costs
through synergy of operation and to expand into Asia’s market.Merger’s
main aim to compete with Nike in the North America market was a failure
as both Adidas and Reebok lost their market share after the merger.But at
the same time merger was successful in its other prospects of increasing
sales, cost reduction and expansion into new market,creating the new value
to the merger.

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Both the companies had their own culture and environment of work absolutely
different from each other which created a lot of problem for the employees to work
and took time to adapt.

Adidas and Reebok are from different countries due to which their rules,laws and
tradition differs.As Adidas acquired the management of Reebok changed which
some time for them to accept and work with ,the employees all were even tensed
due to the fear of cutting down of man power.

But as both the companies are mega brand in itself finally it was decided that both
the companies will be selling their products under their own brandas they have
very high values and hence both the companies have different headquarters and
salesteam to work for the company.

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 EVALUATION

Adidas went through the merger which resulted into not only the rival in the team
but also a much firmer presence in US.Adidas is trying its best to make merger a
great success and the company has closed their factories in Indonesia in order to
broaden its value in the market with Reebok,Adidas is giving way to Reebok to
grow further on the track although it’s going to take time but they have to keep on
moving on the right direction.

The company is working on its sales and marketing strategy;it is decreasing its
reliability on small shopping mall based outlet but placing it on department store
and large spoting good venture Adidas –Reebok have considerably higher
customer loyalty score than Nike.

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 REFERENCES

1.  "Adidas Group History". adidas-group.com. Archived from the

original on 8 February 2015. Retrieved 7 May 2014.

2. ^ Jump up to:a b c d e f g h "Adidas Annual Report 2018" (PDF). adidas.

Archived from the original (PDF) on 24 June 2019. Retrieved 25

June 2019.

3. ^ "The History of Adidas". On This Day In Fashion. Retrieved 16

October 2015.[dead link]

4. ^ "Adidas, Deutsche Telekom, Infineon: German Equity

Preview". Bloomberg L.P. 16 January 2008. Archived from the

original on 6 November 2012. Retrieved 31 May 2016.

5. ^ "Ranking of the largest sporting goods manufacturers worldwide

in 2009, based on revenue". statista.com.

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