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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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2 SHORT-TERM WEALTH EFFECTS OF FASHION M&A TRANSACTIONS

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9 2 SHORT-TERM WEALTH EFFECTS OF FASHION M&A TRANSACTIONS 2.1 INTRODUCTION The fashion and leather accessories industry is an industry of already high mar- ket volumes and strong growth potentials, accounting for approximately $500bn in international trading volume (WTO (2010)). Like many other industries, the apparel segment is also in a state of ongoing consolidation. While a handful of fashion conglomerates have already built large and diversified brand portfolios in recent years, there are still many small, privately held mono-brand apparel companies left that appeal as attractive takeover targets to potential bidders. Despite the industry’s volume and growth potential, the apparel segment is also a cyclical business and bears a serious idiosyncratic risk. Previous research such as the case study of DeAngelo et al. (2002) that focuses on the collapse of the athletic footwear company L.A. Gear show the need for clothing firms to quickly adapt to current trends in a competitive and fast-paced environment. A once-missed trend can especially endanger the survival of smaller, mono- structured companies. It is remarkable that until now, little research activity has been conducted that focuses on this specific market segment. The objective of this paper is to analyze the value implications of mergers and acquisitions in the fashion and accessories industry and to determine the market dynamics of this segment from 1994 to 2009. We conduct an event study analyzing the short-term shareholder wealth effects of 192 global M&A transac- tion announcements on bidder stock prices. The examination of univariate sub-...

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