Friday, July 21, 2006

Purchase of Allen-Edmonds

I don't know much about the sale of Allen-Edmonds to a private equity firm. I do have two reactions.

1. Stollenwerk will do good things with the money.

2. Private equity firms nowdays seem to have more money than sense. I don't know, but I'm thinking that, if they paid 100 million, it was too much. I wonder if they aren't going to be under pressure eventually to cut costs and raise margin? Perhaps you want to get that new pair of shoes now.


Dad29 said...


Under the "old rules" of acquisition, $100MM would be 5X pre-tax earnings, indicating that A-E was earning $20MM/year (pretax) on $100MM in sales.

That cannot be TOO far off from the reality, can it?

Even with the "new rules" (7X earnings) the Company should have been earning $14MM/year on $100MM sales.

And most well-managed firms should be able to knock down 15-20% pretax.

Rick Esenberg said...

Could be, but I doubt it. Remember the enormously, obscenely profitable Exxon was only at 10% last year

jp said...

Sweeney says, “it’s a 500 million brand”.
That suggests, with good marking, the earnings could be greater.
I’ll take 10% of 500 mil.

Dad29 said...

Yah, Rick, but as Jack Welch proved, you can make "earnings" any number you WANT.

It's the gimlet-eyed 'earnings' we're talking about.