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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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5 LONG-RUN PERFORMANCE AND RISK CHANGES FOLLOWING FASHION IPOS

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5.1 INTRODUCTION The fashion and leather accessories industry exhibits a very heterogeneous busi- ness structure. On one hand, a few large, internationally diversified conglome- rates such as LVMH, Phillips-Van Heusen and PPR regularly add further brands to their portfolios and steadily increase company sizes. On the other hand, there are still many fashion houses such as Lanvin, Roberto Cavalli and Versace that are still rather modest-scale, single-brand businesses. For these smaller compa- nies it is not uncommon to be closely connected and publicly associated with central personalities such as their founder or present creative director. This heterogeneity of the fashion industry is also apparent in firms’ owner- ship structures. While most of the large firms have been publicly listed for many years, some founders of smaller, private fashion companies such as Jil Sander, Valentino Garavani and Wolfgang Joop have sold their businesses to financial sponsors or strategic investors as an exit strategy. Mergers and acquisitions, however, are not the only option for change of control processes. In this paper, we will instead analyze the determinants of the long-run stock price perfor- mance of initial public offerings in the fashion and accessories industry. The industry has seen a considerable number of high-profile IPOs that were conducted on foreign stock exchanges, the most recent of which being Italian luxury house Prada’s $2.1bn offering in June 2011 on the Hong Kong Stock Ex- change. Further examples include Esprit Holdings that was also initially listed in Hong Kong and the intended European IPO of...

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