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.

4 comments:

Dad29 said...

Umhhnn...

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.