L'Occitane Case Essay

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Case 3 – L’Occitane en Provence | | International Financial Economics | | Case 3 – L’Occitane en Provence | Question 1: Yes, L’Occitane should do an IPO. Benefits of doing IPO for L’Occitane: - By going public, L’Occitane could secure the required funding to finance growth and expansion. - L’Occitane could use the publicly listed shares to engage in mergers and acquisitions deals. - It could bring prestige and recognition to the company, improving its future growth prospects. - It could broaden the base of ownership which was earlier controlled by only a few investors. - It could minimize the cost of capital for L’Occitane. - It could provide advantage to L’Occitane in labor markets by attracting talnted human resource. - The company could use listed shares in the form of employee stock option plans. By 2009, L’Occitane had 1517 retail locations in more than 85 countries, of which 753 were self-owned. By 2015, it aimed to almost double its number of stores to 1,428, and needed €130 million for the same, €40 million for manufacturing facilities and €20 million for R&D. So to achieve its objectives, it needed to raise capital through IPOs like UC Rusal raised $21.5 billion in its IPO in 2010. Costs and disadvantages of doing IPO for L’Occitane: - Going public will lessen ownership share and thus, control of the owners. - L’Occitane will have to pay Underwriting fees for doing IPO. - It will have to incur legal, accounting, and marketing costs including costs associated with auditing, reporting and complying with exchange regulations. - It will have to incur time cost since management needs to spend a lot of time on IPO process. - IPOs are on average underpriced, and thus company’s shareholders will have to bear that loss also. Question 2: i) France as an investment destination: France is the fifth largest economy in the

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