Prada Case Analysis Essay

FINANCE CoursePRADA TO initial offering OR NOT TO initial offering THAT IS THE QUESTION, AGAIN instance analysis Brief summary of the role with the emphasis on managerial problems that Prada faces. Prada unawaresly requires a residenceificant amount of groovy both to re-finance debt that is maturing in the conterminous sixer to twelve months and to finance its intended out evolution into the Asian (especially Chinese) food markets. Since financial markets are apprised of Pradas pressing need to bring on ceiling, it is important for the board of directors to develop a credible scheme for gentility the requisite detonating device of at least 1 billion. Although the press has been suggesting that Prada forget do an initial public offering, the comp all has tried this some(prenominal) times in the past with no success, mainly because of bad timing (9/11, the s evere acute respiratory syndrome outbreak, and the ongoing global financial crisis and atomic number 63an s al l overeign debt crisis).The board has approached Guido Santini of the investment depone Grupo Capo Milano to come up with a sum up of credible alternatives and a strategy for raising the needed chapiter. 1. What is the current and in store(predicate) prognosis for the opulence goods segment over the next couple of social classs? How should Prada position itself to lard in this market? Luxury goods segment proved to be resilient to the sparing crises and had systematically grown from 1994 till 2010.The luxury industry grew approximately by 2% per year until 2007, and by 1% per year from 2007 to 2010.Beginning from 2010, the global luxury goods market started a new growth chassis driven by emerging markets.This was a significant change as growth was usually driven by the certain markets, especially the US. Prada needs to support a global portfolio of leading luxury brand. undermentioned the series of acquisitions and consistent with its attempt to change state one of t he top global brands Prada consistently worked on expanding its global footprint by opening and running its own stores nearly the world. 2. What should be Pradas priorities in ascertain the exceed way to raise capital letter now?What are Pradas priorities in evaluating several(predicate) ways of raising the notes it requires? How do these relate to Pradas strategy? I choose initial offering over Debt and Strategic partnership. Compare to issuing debt, an initial public offering will not add any more burden to the companys balance sheet, which for Prada, was already showed a sign of insolvency and over leveraged. Another issue is that no firms in this industry have ever raisedmoney in US follow market. Although dim sum bond a Chinese Yuan denominated bonds issued in Hong Kong could be the beat out alternative to this situation, however, the short life and the exchange risk it tough are its most disadvantages. How about change some portion of the firm to the nonpublic equ ity firms to raise capital? For this deal, it seems that they will not only offer a sizeable premium to the family, but also to offer some important positions on the board too.But, compare to IPO, it will not increase Pradas publicity done this method. And also, an IPO in Hong Kong will pass off the company more opportunity to expand their Asia market, especially in China and Japan. Choosing a Strategic Partnership would be respectable like giving that huge effectiveness profit away. 3. What are the different sources of capital that Prada should consider? Should there be a preference for debt versus equity? Should there be a preference for raising capital in one country sex act to another? Should there be a preference regarding the types of investors? How would these influence the attractiveness of the different available sources of capital for Prada? Equity IPO in HK1.higher valuation than listed in Europe2. aim to the Asia market1.HK market has overthrow liquidity (page 7. Sect. 2)3.potential tax problemHKDR1. listed in Milan but also can be bought and sold by investors in HK. 2.help future negotiation in China3. whitethorn have lower valuation than IPO in HK4. higher appeal than IPOStrategic partnership1.current price for PE exploit is attractive2.higher premium 1. higher cost than other alternatives3. may cause partially loss of control of the corporationDebt tralatitious corporate bond1. easily priced 22. further potential financial problem3. higher leverage ratio4. How would you propose the board of directors proceed?One of the best solutions for Prada to solve this problem is to raise capital in the stock market, which we could refer as IPO. Given the current market conditions, listing in Hong Kong might appears to be the best choice after all.