Jos. A. Bank Case Solution

Situation Analysis  

The decision to accept the bid-offer for acquisition needs to be taken with the objective of maximizing the shareholder value and creation of synergies. At present, the management of both organizations is bearing hostilities against each other. This is indicated by the fact that JOSB made the offer for the acquisition of Men’s Wearhouse along with the threat of acquisition of Eddie Bauer. Men’s Wearhouse’s acquisition bid appears more of a retaliatory measure. Nevertheless, there are true opportunities for the creation of synergies through a merger of the two entities for it will lead to the greater reach of the distribution and greater choice for the consumers.

It is important to consider the relative financial situation of the two organizations to determine which business has a stronger financial situation:

The data shows that Men’s Wearhouse has greater Current Assets and Total Assets than its counterpart. The total equity of Men’s Wearhouse is almost twice that of JOSB, thus, it is in a stronger position to carry out the acquisition.

In addition, when the two organizations are compared with respect to their stock performance, Men’s Wearhouse has exhibited greater consistency and stability in its stock price. As regards to the merger of the two organizations, the acquisition represents an attractive value for shareholders of both companies. The combination of the two entities will provide the shareholders of JOSB instant liquidity and considerable value for their investment. The offer price of Men’s Wearhouse represents a premium of 65% on the company's value and a premium of 56% over the closing price of the share of Jos. A. Bank.

Similarly, shareholders of Men’s Wearhouse will benefit from about $ 100 to $ 150 million in annual synergies by improvement in purchasing efficiency, optimizing service practices, cost-effective marketing and rationalization of corporate functions that are redundant. In addition, the vertical direct supply model suggests that Men’s Wearhouse will be able to improve merchandising and supply chain with the combined entity and streamline its inventory over time.

Alternatives

Reject MW’s Acquisition Offer & Acquire Eddie Bauer 

the first strategic alternative for JOSB is to reject the acquisition offer of Men’s Wearhouse and proceed with the acquisition of Eddie Bauer. The advantage of this approach is that the current management of the organization will be able to maintain control of the operations. The drawback of this course of action is that the shareholders of the company will become antagonistic to the current management and will try to change the management through their voting right. Also, Eddie Bauer’s acquisition may appear questionable to the investors and lending organizations of JOSB since Eddie Bauer is a failing organization. The acquisition of this organization may bring about operational inefficiencies within the company.