Prada case evaluation essay
“FINANCE Course
“PRADA: TO IPO OR TO NEVER IPO: FIND OUT HERE, AGAIN case analysis Brief summary of the case with the emphasis on managerial conditions that Prada looks. Prada at present requires a significant amount of capital both to re-finance debt that is certainly maturing over the following six to 12 months and to finance its intended expansion into the Oriental (especially Chinese) markets. Since financial markets are aware of Prada’s pressing ought to raise capital, it is important intended for the board of owners to develop a reputable strategy for raising the necessary capital of for least ¬1 billion.
Although the press continues to be suggesting that Prada can do an initial general public offering, the corporation has attempted this several times in the past with no success, due to the fact of bad timing (9/11, the SARS outbreak, plus the ongoing global financial trouble and Western european sovereign debts crisis).
The board has approached Guido Santini from the investment traditional bank Grupo Capo Milano to come up with a number of credible alternatives and a strategy intended for raising the needed capital.
1 . What is the existing and long term outlook for the luxury goods segment over the next year or two? How should certainly Prada situation itself to prosper from this market? Extravagance goods segment proved to be strong to the economic crises and had consistently produced from 1994 till 2010. The luxury sector grew roughly by 2% per year till 2007, and by 1% annually from 2007 to 2010. Beginning by 2010, a global luxury merchandise market started a new development phase driven by emerging markets.
This is a significant change as development was generally driven by the developed market segments, especially the ALL OF US. Prada needs to support a global portfolio of leading high-class brand. Pursuing the series of acquisitions and consistent with its attempt to become one of the top global brands Prada consistently labored on expanding their global impact by beginning and operating its own stores around the world. installment payments on your What should be Prada’s priorities in determining the best way to increase capital right now?
What are Prada’s priorities in evaluating different methods of raising the cash it requires? How can these connect with Prada’s approach? I choose BÖRSEGANG (ÖSTERR.) over Personal debt and Strategic partnership. Out-do issuing debts, an GOING PUBLIC will not put any more burden to the provider’s balance sheet, which for Prada, was already revealed a sign of insolvency and over leveraged. Another issue is the fact no businesses in this sector have at any time raisedmoney in US relationship market. Even though “dim amount bond ” a Oriental Yuan denominated bonds given in Hong Kong could be the finest alternative to this case, however , the short existence and the exchange risk that involved are its the majority of disadvantages. How about sale several portion of the firm to the private equity companies to raise capital? For this package, it seems that they will not only offer a sizeable premium to the family, but also to offer a lot of important positions on the board too.
But , compare to GOING PUBLIC, it will not increase Prada’s promotion through this approach. And also, a great IPO in Hong Kong will offer the company even more opportunity to increase their Asia market, particularly in China and Japan. Choosing a Strategic Partnership would be just like giving that huge potential profit aside. 3. Exactly what are the different types of capital that Prada should think about? Should presently there be a inclination for debt versus equity? Should presently there be a choice for increasing capital in one country in accordance with another? Should there become a preference about the types of investors? How would these types of influence the attractiveness of the different available sources of capital for Prada? Equity BÖRSEGANG (ÖSTERR.) in HÄSTKRAFTER
1 . larger valuation than listed in The european countries
installment payments on your aim to the Asia marketplace
1 . HK market has reduce liquidity (page 7. Sect. 2)
3. potential tax problem
HKDR
1 ) listed in Miami but also can be bought and sold by simply investors in HK. 2 . help foreseeable future negotiation in China
3. may possibly have lower valuation than IPO in HK
4. more expensive than BÖRSEGANG (ÖSTERR.)
Ideal partnership
1 . current price for PE transaction is attractive
2 . higher premium 1 ) higher cost than other alternatives
3. could potentially cause partially losing control of the corporation
Debt Traditional business bond
1 . conveniently priced a couple of
2 . further potential financial problem
several. higher power ratio
4. Just how would you advise the board of company directors proceed?
One of the best alternatives for Prada to solve this issue is to raise capital in the stock market, which we could refer as GOING PUBLIC. Given the current market circumstances, listing in Hong Kong may appears to be the best option after all.
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