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Lessons from the Trenches: Mergers and Acquisitions The Wolverine Worldwide Story - A Credit Department Perspective

Jim Bianculli

November, 2013

$888.9 $991.9 $1,061.0 $1,141.9 $1,199.0 $1,220.6 $1,101.1 $1,248.5

$1,409.1 $1,640.8

$2,720.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Guidance

Thru its history, Wolverine Worldwide has grown organically and

thru acquisition

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2009 - 2013 EPS excludes the impact of non-recurring restructuring, other transaction charges and integration expenses.

Revenue ($ millions)

$0.85 $1.09

$1.33 $1.52

$1.77 $1.90 $1.77

$2.17

$2.48 $2.29

$2.78

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Guidance

EPS adjusted*

2013 represents the mid-point of our reported guidance range.

10-Year Revenue and EPS Growth Trends

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Wolverine Worldwide has had a global presence since 1959

• 65% of Wolverine’s unit

volume came from outside

the U.S. prior to the acquisition of PLG in

2012

• Office locations in London,

Montreal, Hong Kong and

Mumbai

• Joint ventures in India and

Colombia

• The company utilizes a

network of nearly 200 third

party licensees and

distributors

• Brands distributed in over

200 countries and territories

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Wolverine Worldwide had its beginnings in 1883 – The company

was founded by G. A. Krause as a utility company.

In 1903, Krause built a shoe factory in Rockford, Michigan,

followed by a tannery in 2008. The family-run company was

renamed Wolverine Shoe and Tanning Company in 1921.

1883 1903

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1883 1958

In the 1950s, the company experimented with soft suede casual

shoes, and the Hush Puppies brand was developed organically

as a result. Production started in 1958 and the brand was an

instant hit.

Wolverine was strictly a US presence until 1959, when a Canadian

company was licensed to produce and sell Hush Puppies in

Canada. Thus began WWW’s affiliate network of international

distributors and licensees, now numbering over 200.

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The company was renamed Wolverine Worldwide in 1964, and

first traded on the NYSE in 1965

1883 1958 1964

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1883 1958 1964 1969

In the early 1960s, the Bates Shoe Company began making military dress shoes for the United States Navy. Bates was acquired by Wolverine in 1969. Today, Bates’ entire business is making footwear for military, police and other uniformed public services.

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The 90s were a time of significant change for Wolverine Worldwide: licensing

agreements with CAT (1994) and Harley Davidson (1998) for footwear, the

acquisition of Merrell, a key brand, and Hush Puppies expansion into Europe

The 1997 acquisition of the Merrell brand was significant – Wolverine Worldwide

grew Merrell over the next several years and it became WWW’s largest selling and most profitable brand

1994 1995 1997 1996 1999 2000 1998 1883

U.K.

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In the decade beginning in 2001, Wolverine Worldwide acquired Sebago (2003),

Chaco and Cushe (both 2009), added several Track ‘n Trail retail stores, and entered

into a licensing agreement to produce Patagonia footwear (2006)

In addition to growth in Canada, Wolverine Worldwide also acquired the European

Caterpillar and Merrell businesses, which created the company’s first owned wholesale businesses in Europe

1994 1995 1997 1996 1999 2001 2002 2003 2000 2004 2005 2006 2009 1998 1883

Europe

U.K. Canada

Europe

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The Wolverine Worldwide portfolio expanded significantly

in October 2012 with the acquisition of the Performance +

Lifestyle Group from Collective Brands

With 16 footwear brands and approximately 100 million pairs

annually, we are now one of the largest non-athletic footwear

companies in the world

1994 1995 1997 1996 1999 2001 2002 2003 2000 2004 2005 2006 2009 1998 1883

Europe

U.K. Canada

Europe

2012

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New Brand Operating Groups

HERITAGE

GROUP

LIFESTYLE

GROUP PERFORMANCE

GROUP

2012 Acquisition

• By far, WWW’s biggest acquisition yet

• Sales 90% US / 10% International

– Doubles size of US portfolio • Many common customers

– Tremendous opportunity to expand the new brands internationally

• Significant integration challenges

– Different enterprise systems

– Multiple new operating hubs

– Duplicate functions – or are they?

– Different processes

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• Acquire new products / brands

• Move brands into new markets using existing distribution channels

• Acquire new employees with diverse skills

• Inherit operating systems and processes

• See different approaches to similar tasks – Move closer to Best in Class

– Possible talent upgrade

• Synergies and leveraging opportunities

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Benefits of Acquisition

• Incompatible corporate cultures

• Integration failures (systems, operations, workforce, customers, etc.)

• Not identifying and obtaining synergies

• Treating entire department as “back office” – Need to maintain relationship with customers

– Need connection to sales and commercial teams

– Historian – “This is how and why it was done”

• Expecting instantaneous synergies – May be some increased costs before savings are realized

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Acquisition Risks

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• Eliminate duplication – Examples

• Review need for multiple office building sites, distribution centers, etc.

• Review all service and supply contracts, leases, etc. for consolidation / leverage

• Eliminate duplicate roles / common activities

– Multiple functional leaders / similar job functions

– Identify common customers in combined portfolio and reallocate assignments – no need for multiple touches

• Efficiencies / Critical Mass Opportunities – Examples

• Utilize excess capacity, warehousing, existing distribution channels, etc. for new brands

• Negotiate more favorable rates for service contracts due to increased combined volume

• Adopt most efficient processes or redesign processes to be more efficient

• Move transaction processing activities and/or related functions to shared service center

• Revisit outsourcing options

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Synergies / Leveraging Opportunities

Company should be prepared to address customer requests to share synergies such as price reductions for combined larger volumes…or requests for best payment terms across all brands

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Note:

MBB = Michigan Based Brands

BBB = Boston Based Brands (newly acquired)

WWW’s Global Credit Presence Following 2012 Acquisition

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Note:

MBB = Michigan Based Brands

BBB = Boston Based Brands (newly acquired)

WWW’s Global Credit Presence 2014 Plan

Consolidate in London

Maintain some credit professionals in Lexington,

move some functions to Rockford Sort out

Deductions and New Accounts

– Credit policy

– Work flow, procedures and processes

– Credit scoring / risk assessment

– Monitoring customer account activity

– Treatment for collections and disputes

– Automated cash application opportunities

– Multiple invoice delivery systems and payment formats

– Invoice accuracy

– Effective deductions management

– Comprehensive credit controls

– Managing bankruptcy claims

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Review the credit function

This is an appropriate time to improve credit policy, procedures and processes and move even closer to “best practices”

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Power of the Portfolio