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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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4 DIVESTITURES, THE INSOLVENCY OF ESCADA AND BEHAVIORAL FINANCE

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4.1 INTRODUCTION During the first two decades since its foundation in 1976, Munich-based haute couture and prêt-à-porter luxury fashion brand ESCADA AG participated re- peatedly in the takeover market to support its growth strategy, creating a diversi- fied portfolio of ladies’ fashion and accessories brands and product lines. While revenues grew steadily, the company’s profitability became weak. Due to a se- ries of operating and strategic deficits as well as macroeconomic crises at the beginning of the 21st century, management agreed upon a corporate refocusing on ESCADA’s core competencies in the luxury fashion market. While most of the company’s non-core segments were in fact subsequently divested, management for some reason adhered to PRIMERA AG, the com- pany’s single most important mid-price ladies’ fashion business line. Upon the decision for the refocusing strategy in fiscal year 2000/2001, PRIMERA AG which included the four brands apriori, BiBA, cavita and Laurèl accounted for roughly one quarter of ESCADA’s total sales volume. In spite of management’s continuous assurance of its divestiture plans for PRIMERA, ESCADA invested heavily in the non-core segment over the course of the following years and kept hold of it for almost an entire decade. The final divestiture process was not ini- tiated until ESCADA finally faced serious financial distress at the end of 2008. Since management realized the positive implications of a potential disposal at an early stage and independent broker reports consented on a lucrative stand- alone value range of between €150m and €200m for the...

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