Prada Case Analysis Essay

FINANCE CoursePRADA TO initial offering OR NOT TO IPO THAT IS THE QUESTION, AGAIN case analysis brief summary of the case with the emphasis on managerial tasks that Prada faces. Prada currently requires a significant amount of keen both to re-finance debt that is maturing in the next sixsome to twelve months and to finance its intended growth into the Asian (especially Chinese) market places. Since financial markets are aware of Pradas pressing need to provoke not bad(p), it is important for the menu of directors to develop a credible strategy for nip and tuck the necessary capital of at least 1 billion. Although the press has been suggesting that Prada get out do an initial public offering, the company has tried this several times in the then(prenominal) with no success, mainly because of bad timing (9/11, the SARS outbreak, and the ongoing worldwide financial crisis and European s everywhereeign debt crisis).The board has approached Guido Santini of the investment bank Grupo Capo Milano to hail up with a number of credible alternatives and a strategy for face lift the needed capital. 1. What is the current and future outlook for the opulence goods segment over the next couple of years? How should Prada position itself to prosper in this market? Luxury goods segment proved to be resilient to the economic crises and had consistently 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 international luxury goods market started a new growth phase driven by emerging markets.This was a significant change as growth was unremarkably driven by the developed markets, especially the US. Prada needs to support a global portfolio of leading luxury brand. Following the series of acquisitions and consistent with its undertake to become one of the top global brands Prada consistently worked on expanding its global footprint by opening and running its own st ores around the world. 2. What should be Pradas priorities in determining the better(p) way to raise capital now?What are Pradas priorities in evaluating contrasting ways of raising the funds it requires? How do these relate to Pradas strategy? I adopt IPO over Debt and strategical partnership. Compare to issuing debt, an IPO will not add any more(prenominal) burden to the companys balance sheet, which for Prada, was already showed a sign of insolvency and over leveraged. Another be intimate is that no firms in this industry have ever raised capital in US bond market. Although dim sum bond a Chinese Yuan denominated bonds issued in Hong Kong could be the best alternative to this situation, however, the concisely life and the exchange risk it involved are its most disadvantages. How or so sale some portion of the firm to the private equity firms to raise capital? For this deal, it seems that they will not only offer a respectable bounteousness to the family, but also to of fer some important positions on the board too.But, compare to IPO, it will not increase Pradas packaging through this method. And also, an IPO in Hong Kong will give the company more opportunity to expand their Asia market, especially in China and Japan. Choosing a Strategic Partnership would be just like giving that huge electromotive force profit away. 3. What are the different sources of capital that Prada should consider? Should there be a orientation course for debt versus equity? Should there be a preference for raising capital in one country relative to other? 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 lower liquidity (page 7. Sect. 2)3.potential evaluate problemHKDR1. listed in Milan but also can be bought and sell by investors in HK. 2.help future negoti ation in China3. may have lower valuation than IPO in HK4. higher terms than IPOStrategic partnership1.current price for PE transaction is attractive2.higher premium 1. higher cost than other alternatives3. may cause partially departure of control of the corpo proportionalitynDebt Traditional corporate bond1. easily priced 22. further potential financial problem3. higher leverage ratio4. How would you recommend 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. attached the current market conditions, listing in Hong Kong might appears to be the best choice after all.