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Chapter 544 Sports Brands

Inside the meeting room, soft lighting shone on the long conference table. After Ralph said he would convey the message to Ferguson, he steered the conversation toward the acquisition strategy in the sporting goods market with a calm smile.

"Our acquisition offer to Amer Sports Group has been formally rejected," Ralph said, his gaze sweeping over the assembled executives. "The global sporting goods market is in a period of sustained growth, with the market size maintaining a steady compound annual growth rate."

"The strategic transformation decision that Amer Sports Group has made and implemented in the past few years—divesting non-sports and non-core businesses and focusing on the core sports track—has yielded remarkable results. It has not only optimized the company's business structure and profit model, but also enabled its market value to grow explosively, with extremely strong development momentum."

"Recently, Amer Sports Group has been accelerating the expansion of its product portfolio, successfully acquiring several niche brands with technological advantages and market foundations in their respective fields, and entering multiple high-potential sports fields such as tennis, baseball, and skiing."

"Amer Sports' senior management team and shareholders have extremely high expectations for the company's future growth and generally believe that the company is still on a path of rapid value appreciation, so they rejected our acquisition offer."

No sooner had Ralph finished speaking than Ernst opportunely asked, "And what about Fila?"

At the time, Ralph submitted a list of acquisition candidates that included many brands, but Ernst was not very knowledgeable in this area; the only brands he recognized were Amer Sports and FILA.

Ralph shook his head slightly upon hearing this. "We have proactively terminated the bidding process for FILA and abandoned our acquisition plan for the brand."

This surprised Ernst slightly, and he cast a questioning glance at him.

Ralph then explained, "FILA's strategic transformation in the early to mid-90s was a classic example in the industry and was very successful."

"By focusing on the North American market as a core breakthrough point, targeting the basketball category, and leveraging the spread of rap culture to expand brand influence, we have successfully reached young consumers. This series of combined efforts has greatly enhanced FILA's brand awareness and market penetration worldwide." "In addition to the newly developed markets, FILA also maintains a high level of exposure in its traditional strongholds."

"Tennis player Sabatini won his first Grand Slam title while wearing Fila. In 1991, Monica Seles became the youngest French Open champion while wearing Fila and went on to win several more Grand Slam titles. Albo Domba won the World Cup gold medal while wearing Fila skiing equipment. Antonio Rossi won the Olympic rowing gold medal while wearing Fila."

"The endorsements from these top athletes have solidified FILA's brand image of professionalism and made it one of the benchmarks in the sportswear industry."

"In 1997, Fila's annual sales exceeded $400 million, and many people considered it one of the world's four major sports shoe brands."

"However, with the popularity of sportswear, a large number of competitors have entered the market, squeezing FILA's living space. In particular, the outbreak of the Asian financial crisis has affected the global economy, causing a downturn and a sluggish consumer market. FILA's sales this year may be halved."

"FILA's current market value is around $11 billion, but FILA's shareholders are not satisfied with our $13 billion offer. They insist that FILA's sales slump is only temporary, and that as the global economy gradually recovers, the consumer market will rebound, and FILA's sales will return to its previous peak levels. Therefore, they are not satisfied with our acquisition price at all."

Ernst subconsciously stroked his chin, his brow furrowing slightly, and asked, "What's their asking price?"

"$18 billion." Ralph's tone revealed a hint of helplessness as he announced the figure. "This offer not only far exceeds our team's upper limit for FILA's valuation, but it's even $3 million higher than FILA's market capitalization at its historical peak in 1996."

"There was a huge gap between the two parties' price expectations. After multiple rounds of communication and negotiation, I did not feel that there was any room for further negotiation, so I directly abandoned the acquisition of FILA."

The failure to acquire two flagship brands has indeed dampened morale, and the atmosphere in the meeting room has become quite somber.

"However, we did gain something," Ralph said, glancing at everyone before turning the tables. "We acquired Suunto, a professional Finnish brand that specializes in sports watches, navigation devices, and diving equipment. They have extensive technology and a significant market share in sports monitoring equipment, which I think can be a great help to us in the sports machinery sector."

A sports watch? Ernst's eyes lit up when he heard this.

In the long run, sports watches have enormous development potential. They are not just simple timekeeping tools as they are currently perceived; they also have the potential to develop multiple functions such as sports data monitoring and health management.

The smartwatches that became popular around the world in later generations evolved from sports watches.

Apple, the assembly genius, combined smartphones and sports watches, creating a smartwatch market that almost everyone owns, which holds enormous commercial value.

Another point is that sports watches have a faster product iteration cycle compared to traditional watches, which also means a larger market.

"In addition to Suunto, we also successfully acquired the Norwegian outdoor brand, Alfonso, founded in 1929. This brand, along with Kløttermsen and Alfonso, is known as one of the three major Nordic outdoor brands and holds a certain position in the global outdoor apparel industry."

"With the acquisition of this company, our product line now covers a wide range of outdoor activities, including skiing, mountaineering, and trail running."

It has to be said that Scandinavia is truly remarkable in the outdoor apparel industry.

Those are climbing rats and matchsticks! The fact that Old Man Head can be compared to these two shows its technology and market recognition.

However, after his reflections, Ernst asked, "But the problem remains: these brands have a relatively limited audience and are unable to shoulder the responsibility of being flagship brands, and cannot become the core engine driving the development of the entire product matrix as we originally planned."

According to Ralph's initial strategic plan, the plan was to acquire a flagship brand with sufficient global recognition, a broad market base, and brand appeal. Using this brand as the core, the plan would then acquire niche sports brands in various sub-sectors to build a comprehensive and multi-layered sports product matrix, achieving full coverage from the core brand to sub-categories.

However, judging from the current acquisition results, neither Suunto nor Old Man Head clearly possesses the broad audience and global influence required for a flagship brand, making it difficult for them to shoulder this responsibility. Faced with Ernst's doubts, Ralph showed no anxiety whatsoever. Instead, a mysterious smile appeared on his lips as he slowly said, "Therefore, we have found a larger brand that truly possesses flagship potential."

Once he had everyone's attention on him, Ralph didn't keep them in suspense and blurted out a brand that everyone was familiar with.

Reebok.

"Reebok?"

Many people were surprised when they heard the brand name, and some even let out a low gasp, clearly not expecting that the private equity department would target this brand.

Ernst understands the public's reaction, because the brand is indeed very strong right now.

He first heard of this brand in his previous life when it signed Allen Iverson and Yao Ming, gaining a large number of fans in China by leveraging the star power.

However, Reebok's development in the Chinese market was not smooth. Although it was once very popular, it faded from consumers' sight after a few years and had a low presence.

But this brand was truly a force to be reckoned with in North America, especially in the 80s and 90s.

In 1982, Reebok seized the market opportunity presented by the rise of women's aerobics and launched its first women's aerobics shoe.

With its trendy design, comfortable wearing experience, and accurate market positioning, this product quickly became a best-selling item, not only igniting the women's sportswear market but also enabling Reebok's sales to achieve a leapfrog growth, increasing a hundredfold to $1.5 million.

By 1987, Reebok had surpassed Nike to become the world's number one athletic shoe brand, with sales exceeding $14 billion. In the 90s, its innovative PMP inflatable basketball shoes were launched, gaining popularity among professional athletes thanks to their personalized upper technology.

Even if Reebok claims to be the world's number one sports brand, there will be objections, but also a fair share of affirmation.

"British Reebok or American Reebok?" Ernst asked a key question.

Reebok's success is mainly reflected in the North American market, which accounts for 70% of Reebok's total global sales.

However, the operating rights of Reebok North America were not held by Reebok's headquarters in the UK, but by North American businessman Paul Farman.

This same guy brought the British brand to the world's attention.

"If we wanted, we could acquire both."

Ralph's answer surprised Ernst somewhat; even though he had asked the question, in his mind the answer was Reebok.

Reebok is a family business, and the current generation is actually struggling to keep up with the management pace.

To put it simply, as Reebok's market size continues to expand and its business scope continues to extend, higher demands are being placed on the management team's strategic planning capabilities, market responsiveness, and operational capabilities.

However, Reebok's family-style management has led to incompetent managers who are unable to keep up with the company's development.

The problems Reebok has faced in the last two years, particularly the several criticized new models that lack technological sophistication, all reflect a lack of management competence. Rumors have long circulated that Reebok UK is interested in selling, but price has consistently been a major issue.

Reebok has established sufficient brand recognition, but the real profits are in the hands of Paul Farman, so disagreements are inevitable regarding the sale of Reebok UK.

They wanted to use Reebok's current brand influence as the evaluation standard, but the acquirer intended to remove the premium brought by the brand benefits of Reebok North America.

"How could Paul Farman be?" Ernst asked, voicing everyone's question.

His wealth all came from Reebok. Many people wanted to buy his North American Reebok, but he refused them all.

Ralph shrugged at Ernst. "The internet really is a cannibalistic place."

Ernst was taken aback, then realized that the old man had also set his sights on the internet industry and was planning to sell Reebok and start a second business.

"I love the Internet."

Ernst's words caused the entire conference room to burst into laughter.