Suit Wars: Men's Wearhouse versus JoS. A. Bank - Case Solution

1. What is the business of Men’s Wearhouse and JoS. A. Bank, and what

are the synergies between them?

Both Men’s Wearhouse and JoS. A. Bank are in the apparel and clothing business.

Men’s Wearhouse sells style-conscious and contemporary men’s suits and provides tuxedo rental in both the United States and Canada. It offers a wide range of classic styles and modern fits.

JoS. A. Bank, on the other hand, utilizes a traditional and conservative preference in classic men’s styling and specializes in products for the more affluent customers, offering a full selection of men’s tailored and casual clothing, footwear, and accessories.

The synergies that exist between them are the revenue and expense synergies. Revenue synergies incur in terms of expanded customer base boosting sales, while expense synergies occur in reduced rental, transportation, and administration expenses.

Synergies would be fully achieved by capitalizing on JoS. A. Bank’s strength in e-commerce and direct selling and Men’s Wearhouse’s leadership position in the tuxedo rental business.

2. What kind of synergies and their magnitude do you expect in this

merger?

One main synergy that will result from merging is cost-cutting, as both companies utilize a joint effort in purchasing materials, warehousing, administration, and advertising of the products. Through merging, the number of warehouses required will be reduced, and so will the administration costs in terms of executives, inventory control, etc.

Also, advertising costs will drastically reduce as the tough competitive advertising will be diverted into a milder informative type of advertising as the companies now act together rather than trying to outdo each other.

Men’s Wearhouse announced in 2014 that it would save $100m to $150m in synergies from the collaboration with JoS A. Bank functions.

Another synergy that the companies will mutually share is the financial and revenue synergies by combining its exclusive brand businesses and leveraging on Jos. A. Bank’s strength in e-commerce and direct selling and Men’s Wearhouse’s leadership position in the tuxedo rental business.

Complementing one another will enable the businesses to enjoy a wider customer base and an increased depth of products offered while also enlarging the capital base of the merger.

Marriage between Men’s Wearhouse and JoS. A. Bank could bring in benefits of around $2 billion that would come in terms of cost savings in purchasing, distribution, and logistics; advertising and marketing; general administration; and store optimization.

Earnings per share for Men’s Wearhouse jumped by 4.8%, while JoS. A. Bank increased by 3.9% on the announcement of the merger deal in 2014, which set a precedent for incrementally increasing synergies in the coming years.