MINICASE Luxury Wars

United States, France, Germany, and Western Europe. Hermes International is a multi-billion dollar French business possess and controlled by the Hermes family. The business makes and sells luxury goods across numerous product categories. After world passed down through several generations the club decided to diagnose its sh atomic number 18 on the ordinary market for the reasons listed below To translate family members with a means to value their situation in the gild To allow partial cash-outs if dividends alone were insufficient, knowing that some family members were cognize to maintain lavish lifestylesTo raise large(p) period still being adequate to influence important decisions (like electing the CEO or Chairman), and still controlling the strategic and operational decisions of the firm To obtain financing that would endorse the foresightful term development of the fellowship and to accommodate ease of trading for sh atomic number 18holders in transfer of owne rship. B. What take a chances comes from a public listing? Amidst the several advantages of going public thither are equally associated risks for a familiarity to consider when making such decisions.The list below, while not exhaustive, identifies some of the risks associated with a company ongoing public The mental representation problem. When a company goes public it runs the risk of minimal interest. The potential for this conflict comes on as the objective of worry and owners whitethorn not be aligned. dividing line that in the case of Hermes International for the first succession ever the current CEO is not a family member. Without adequate controls going public can distort long-term vs.. short-term value minimization. Privately held firms usually own long-term value minimization while publicly held firms tend to focus on quarterly earnings.Earnings now have to reward shareholders and not just support the Emily. center on profitable growth may change as decisions t aken may be consistent with impatient neatism. Things excrete in the company and owners are unaware. Note the Renault and Elviss share acquisition. Loss of control of the company (limited control as to when shareholders go to the secondary winding market and no control everyplace equity swaps on some summate of the companys shares) Loss of confidentiality and flexibility due to regulations of the pledge and exchange commission.Vulnerability to take over should the descent price decline significantly. Increased capital can allow Coos adequate opacity to take on additional projects that are not aligned with the interest of shareholders. With the long list of risks to which company IIS are expose after going public, there are measures can be taken to slander the impact of the risks to shareholders, These controls can come in the form of stock options (restricted or open), management compensation packages, or an instituted holding company to represent and manage shareholders.