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M&A Activity, Divestitures and Initial Public Offerings in the Fashion Industry

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Steffen Meinshausen

This thesis analyzes four individual corporate finance-related research objectives on the fashion and leather accessories industry. The first two studies investigate the share price reactions of strategic bidder M&A transactions and their key drivers. The third study analyzes the implications of a missed disposal opportunity in the luxury fashion segment. Finally, the fourth study illustrates the long-term performance and changes in systematic risk exposure of initial public offerings in the fashion industry. The thesis contains a variety of empirical findings that are novel to the existing literary base of corporate finance research. It shows the various drivers of consolidation in a highly-dynamic and heterogeneous industry segment over the course of the last two decades.

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LIST OF FIGURES .......................................................................................... XIII LIST OF TABLES ............................................................................................ XV LIST OF ABBREVIATIONS ......................................................................... XVII LIST OF SYMBOLS ....................................................................................... XIX 1 INTRODUCTION .......................................................................................... 1 2 SHORT-TERM WEALTH EFFECTS OF FASHION M&A TRANSACTIONS .......................................................................................... 9 2.1 INTRODUCTION ................................................................................... 9 2.2 LITERATURE OVERVIEW ................................................................ 10 2.3 DATA AND METHODOLOGY .......................................................... 12 2.3.1 Data ................................................................................................. 12 2.3.2 Methodology .................................................................................... 17 2.4 RESULTS .............................................................................................. 19 2.5 CONCLUSION ...................................................................................... 26 3 OPERATING PERFORMANCE CHANGES FOLLOWING FASHION M&A ACTIVITY ......................................................................................... 29 3.1 INTRODUCTION ................................................................................. 29 3.2 LITERATURE OVERVIEW ................................................................ 30 3.3 DATA AND METHODOLOGY .......................................................... 32 3.3.1 Data ................................................................................................. 32 3.3.2 Methodology .................................................................................... 35 3.4 RESULTS .............................................................................................. 37 3.4.1 Short-term announcement effects .................................................... 37 3.4.2. Cash flow returns and profitability .................................................. 38 3.4.3 Changes in financial leverage ......................................................... 40 3.4.4 Sales growth of M&A and internal investments .............................. 42 3.4.5 Cross-sectional regression analysis ................................................ 43 3.5 CONCLUSION ...................................................................................... 46 4 DIVESTITURES, THE INSOLVENCY OF ESCADA AND BEHAVIORAL FINANCE .......................................................................... 49 4.1 INTRODUCTION ................................................................................. 49 XII 4.2 LITERATURE OVERVIEW ................................................................ 50 4.3 BEHAVIORAL FINANCE AND THE PRIMERA DISPOSAL ......... 54 4.3.1 Historical background of ESCADA (1976-2000) ........................... 54 4.3.2 Phase I (2000-2003) ........................................................................ 56 4.3.3 Phase II (2003-2007)....................................................................... 59 4.3.4 Phase III (2007-2009) ..................................................................... 65 4.4 CONCLUSION ...................................................................................... 70 5 LONG-RUN PERFORMANCE AND RISK CHANGES FOLLOWING FASHION IPOS ........................................................................................... 73 5.1 INTRODUCTION ................................................................................. 73 5.2 LITERATURE OVERVIEW ................................................................ 74 5.3 DATA AND METHODOLOGY .......................................................... 76 5.3.1 Data ................................................................................................. 76 5.3.2 Methodology .................................................................................... 79 5.4 RESULTS .............................................................................................. 81 5.5 CONCLUSION ...................................................................................... 88 6 CONCLUSION AND OUTLOOK .............................................................. 91 BIBLIOGRAPHY ............................................................................................... 97

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