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1、The 15thFinancial Case Analysis ContestAnalysis ReportCase Name：PRADA: TO IPO OR NOT TO IPO: THAT IS THE QUESTION, AGAINReport Title：SWEET ARE THE USES OF IPOTeam Name：WINDTRACKERDATE: 16/12/2012ContentsABSTRACT11.Macro and Industry Analysis31.1Financing Environment31.1.1International Monetary Marke
2、t31.1.2International Bond Market71.1.3International Stock Market91.1.4International Private Equity Market101.2Industry Analysis101.2.1Industry Life Cycle Analysis111.2.2Five Forces Analysis132.Financial Analysis and Forecasting202.1Financial Analysis202.1.1Profitability Analysis202.1.2Debt Solvency
3、Analysis242.1.3A Close Look at Pradas Cash Flow272.2Forecasting and Capital Needed332.2.1Forecasting Pro Forma332.2.2Capital Needed353.Financing Alternatives Selection383.1IPO Alternative393.1.1Current Environment393.1.2Pros and Cons443.1.3Simulations463.1.4Impact on Future Growth533.2Strategic Part
4、ner Alternative573.2.1Current Environment573.2.2Pros and Cons583.2.3Simulations613.2.4Impact on Future Growth743.3Debt Alternative813.3.1Current Environment813.3.2Pros and Cons863.3.3Simulation883.3.4Impact on Future Growth933.4Other Financing Alternatives963.4.1Commercial Paper963.4.2Project Financ
5、ing973.5Financing Method Comparison983.5.1Immediate Effect Comparison under TAGCO983.5.2Long-term Effect Comparison under FRICO1003.6Recommendation on IPO1033.6.1Tax-related Recommendations1033.6.2Control-related Recommendations1043.6.3Other Recommendations1064.Risk Analysis1074.1Macro-economy Risk1
6、074.1.1Interest Rate Risk1074.1.2Exchange Rate Risk1084.1.3Tax Rate Risk1094.2Operation Risk1104.2.1Counterfeit Product Risk1104.2.2Brand and Reputation Risk1104.2.3Instability of International Market Risk1104.2.4Key Person Risk1114.3Financial Risk1114.3.1Seasonal Fluctuation Risk1114.3.2Cost of Lux
7、urious Fabrics Risk1125.Conclusion112Appendix114Reference118ABSTRACTPrada is an Italian high-end luxury brand specializing in luxury clothes, handbags and accessories. Prada family dominates the company through layers of shell firms, at last Prada Holding BV owns 95% of the share of Prada Spa. Now t
8、he company has to tackle to major problems. First, Prada has a 1 billion to-be-matured debt, almost half of which in the next six months. Among the 1 billion debt, the parent company, Prada Holding BV has 600 million while Prada Spa owns the remaining 400 million. Prada family would like to repay th
9、e debt with the financing conducted by the Prada Spa. However, they are still hesitating which financing alternatives should they choose. Second, in the downturn of the world economy, Asia, especially China, has become the new boost area where Prada eagers to make substantial investment to realize i
10、ts expansion plan. Now the question comes back to that where and how will the family acquire the needed cash.The analysis is made up of five parts. In the very beginning, a macro analysis tries to bring up an overview on the worldwide financing environment and on the luxury goods industry. After tha
11、t, an analysis on the Prada Spa current financial situation is made, and then, with reference to the Prada expansion plan, we quantitates a detailed capital budget. Up to now, the total financing gap is determined. The third part comes to the three different financing alternatives, respectively IPO,
12、 strategic partner and debt. For each of them, the related cost, timing, amount of cash are listed throughout some simulation and impacts on the Prada future are also discussed from several aspects. The next is to compare the three alternatives all together under a framework, derived from FRICO anal
13、ytical method, to review both the immediate and long-term effect on the company in order to find out exactly which alternative best suits Prada. The fourth part is risk control and recommendation where risks are inspected from all around and available IPO tools are mentioned to better overcome the d
14、isadvantage of our solution. Finally, conclusions are drawn to summarize the whole report to demonstrate you our major points.1. Macro and Industry Analysis1.1 Financing EnvironmentCombined with the background given in the case, we believe that before Prada intentionally spread its financing strateg
15、y which is fit with its financial status, the international macroeconomic environment investigation is necessary. Prada, a long history Italian enterprise, has the most direct and convenient financing channels through the European finance market. In addition, the active American market and strong As
16、ia Pacific market also shall be taken into account. Based on the above background, we looked up a large number of the 2010 international financial market data from the Peoples Bank of China Journal and Chinese Social Science Financial Statistics Database, and intercepted four quarters of the interna
17、tional financial market operation data and analysis in 2010. We try to select the best financing channels from the point of view of Prada according to these data.In the following analysis, we will show four aspects of the 2010 international macro financial markets from the international monetary mar
18、ket, international debt market, international stock market and international private equity market.1.1.1 International Monetary MarketThe dollar, which increased firstly and then decreased, is going strong generally. In the first half year of 2010, due to the good U.S. economic recovery and the deep
19、ening European sovereign debt crisis, the U.S dollar index goes high. And it has 88.41 on June 7th which is at one-year high. Later the pace of economic recovery slows down, investors expectations for FED to restart quantitative easing measures have gradually increased, additionally, panic caused by
20、 European sovereign debt crisis has gradually decreased, risk appetite among investors has risen, and the dollar index therefore dropped. After November, due to the Irish debt problems and conflicts in North and South Korea, investors hedge demand increased, thus the dollar index went strong. At the
21、 end of the year, the dollar index closed at 79.028 which have risen by 1. 5% compared to the end of the previous year. The euro against the dollar rose first and then went down.The US dollar rate trend of 2010 From beginning of this year, due to the European sovereign debt crisis, plus investors wo
22、rried more about the euro zones economic recovery slowing down, the Euro against the dollar went down 1.1914 on June 7th, the lowest one since March 2006. Since then, as the released Euro zone economic data turned better, the sovereign debt crisis panic decreased gradually, the Euro against the doll
23、ar rebounded steadily. At the year end, the euro against the dollar closed at 1.3377, a decrease of 6.6% compared to last year.The Euro rate trend of 2010 Sterling against the dollar rose first and went down later. In the year beginning, due to the British waned economic data and its high fiscal def
24、icit, sterling against the dollar went down generally. A 14-month low of 1.4301% was closed on May 18th. Then the UK economic data turned better, the British government approved The Budget of slashing the fiscal spending greatly, many British Banks went through the large European bank stress tests,
25、sterling against the dollar remains a generally oscillating rising trend. After November the European debt crisis again spread the market, the worries of British government cutting the government spending may affect the British economic recovery process were heating up, as a result, sterling against
26、 the dollar dropped. At the year end, sterling against the dollar closed at 1.5599, a 3.4%decrease compared to last year.The yen against the dollar rises obviously. At the beginning of this year, Japan announced that most of the economic data were behave well, the sovereign debt problems caused by G
27、reece and other countries enabled investors to hedge risks greater than before, the dollar against the yen was oscillating downward to early march. Later on, along with the market risk preference gradually gets warmer, the dollar against the yen exchange rate oscillating upward. Since May, as invest
28、ors worried about global economic recovery prospects, the market expected the federal reserve will be implemented a new round of quantitative easing policy ,the dollar against the yen went down, on October 29,it reached the lowest 80.39 in the past 15 years. Subsequently, the dollar against the yen
29、rebounded slightly and closed at 81.15, a decrease of2.7%compared with last year.The dollar, the Euro and the sterlings short-term interest rates rise, the yen short-term interest rates fall. In 2010, the Federal Reserve, the ECB and the bank of England announced that all index interest rates mainta
30、ined unchanged and Japanese Banks lowered the policy interest rate to 0-0. 1%. As the expectations for the market of the monetary policy towards may turn from exiting the loose monetary policy to may further enlarge the quantitative easing scale, the dollar short-term interest rates rose first and t
31、hen down. At the end of the year, the three-month dollar Libor closed at 0.3028%,a 5.2% increase compared to the last year, The Euro short-term interest rates rise for the sovereign debt crisis triggered liquidity worries. At the year end, the three-month Euro Libor closed at 0.9388% and increased b
32、y 28.4% over last year end. Because of the higher inflation the British pound short-term interest rates upward overall. The three-month pounds Libor closed at 0.7323% at the year end and has increased by 12.7% compared to last year end. Due to the market still keeps the expectations of the bank of J
33、apan which may be further introduced quantitative easing measures and it may cut interest rates down to zero, the yen short-term interest rates therefore declined. The end of the year, the 3 -month yen Libor closed at 0.1881% and has decreased by 8.9 percentage points compared to the end of last yea
34、r.The main currency interest rate trend of year 2010 Peoples Bank of China1.1.2 International Bond MarketNext, lets focus on bond market, middle and long term government loan yield rate of major country rebounded slightly after being at the bottom of the ground in 2010. From the beginning of 2010 to
35、 the first ten-day period of April American middle and long term government loan yield rate was at consolidation trend. From the second ten-day period of April, because of some factors such as the increase of investors hedge emotion and the possibility of FEDs further buying government loan, the yie
36、ld rate went down with a vibration. And during that time, 10-year government loan yield rate was 2.3878% at the end of Oct.7, which was the lowest from January, 2009. After the middle 10-day period of October, the yield rate rose again because American economic data constantly took a turn for the be
37、tter, American government issued a large number of new loans and other factors. And 10-year government loan yield rate was ended by 3.2968% this year, which decreased 54.1 basis points compared by the one last year.In Europe, middle and long term government loan yield rates trend of Germany and Engl
38、and was similar to American. From the beginning of 2010 to the end of August, the yield rate of German and England totally went down with a vibration because European sovereign debt crisis constantly developed, economic resurgence in Eurozone was not stable and other factors. From September, the yie
39、ld rate of German and England increased a little resulted from the great support of main economic data in European countries. And at the end of the year, Germans government loan yield rate was ended by 2.968% and the one of England was 3.396%, which decreased 41.3 and 61.7 basis points.In Asian-Paci
40、fic market, the middle and long term government loan yield rate of Japan mostly tended with American loan. And at the end of 2010, 10-year government loan yield rate was ended by 1.116, which decrease 17.5 basis points compared by the end of last year.10-year government loan yield rates trend of mai
41、n country Peoples Bank of China1.1.3 International Stock MarketAt last, lets focus on stock market, and global main stock indexes increased constantly in 2010. From the beginning of the year, the first three stock indexes in American constantly increased because investors looked to further increase
42、of American economy, the first seasons earnings of many large financial institutions performed well and other factors. From the last 10-day period of April, the first three stock indexes in American constantly decreased because hedge emotion in market increased resulted from Europe bond, American fi
43、nancial industry was expected to be kept under stricter supervision and other factors. And Dow Jones index was ended by 9686.48 on July.2sec, which was the lowest in 2010. Then the first three stock indexes totally constantly increased because most public companies second season earnings performed w
44、ell, FRB pushed out a new series of quantitative easing policy, American economic data performed greatly, policy of individual income taxs decreasing extended and other factors. And Dow Jones index was ended by 11585.4 on Dec.29th, which was the highest in the past two years. At the end of the year,
45、 Dow Jones, Standard Poole and NASDAQ index were ended by 11577.5, 1257.6 and 2652.9, which increased 11.0%, 12.8% and 16.9%. European main stock indexs trend was similar to the one of American. At the end of 2010, Germany Dax and England Financial Times index were ended by 6914.2 and 5899.9, which
46、increased by 16.1% and 9.0%; France CAC40 stock index was ended by 3804.8, which decreased 3.3% compared to the end of last year.Most stock indexes in Asian stock market increased because most countries and regions had a great economic resurgence, and Hong Kong in China, Korea, India and Thailands m
47、ain stock indexes increased by 5.3%, 21.9%, 17.4%, 40.6%. But China stock markets decreased by 14.3% in 2010 because of stringing flow ability policy and other factors. Nikkei 225 stock index decreased by 3.0% in 2010 under the situation where Japanese Yen constantly increased in value but profitabi
48、lity of Japanese enterprises was weakened.1.1.4 International Private Equity MarketPE industry around the world has suffered a lot since 2008. The amount and scale of transactions has severely diminished, especially in North America and Europe, where credit market went through a hard time, making it less appealing of the leveraged buyout based on the complicated transaction mode.
