The high valuation of family-controlled Prada has caused concern about its management, with analysts worrying that the value cannot be sustained in the future due to the family’s lack of a clear succession plan.
The fashion giant’s planned initial public offering values the company at over $15 billion according to a statement by Prada. The listing will see the family’s stake – controlled by the husband-wife team of Patrizio Bertelli and Miuccia Prada – fall to 80% from the current 95% owned through family holdings.
Analysts in Italy told Reuters that Prada relies heavily on the couple, and with no heirs or managers at a key managerial role, this does not bode well for the company’s future.
But Joachim Schwass, professor of family business at Lausanne, Switzerland-based IMD, is positive about the company’s listing plans. He told CampdenFB: “The IPO can provide the family with access to capital markets to solidify their balance sheet and fund further growth."
Prada plans to raise $2.6 billion through the listing and will use the money for further expansion and growth. Schwass said this was good news for the business as it has a “history of financial struggles in terms of funding strong growth.” Prada has so far cancelled its IPO plans three times (Continue reading here)
But Schwass agreed that the IPO could also indicate that the role of the family may be diminished in the future. Analysts further speculated that poor succession planning may lead to the business being acquired by someone else after two years.
Prada was launched in 1913 by Mario Prada and his brother Martino as a leather goods shop. Sixty-two-year-old Miuccia Prada is the third-generation of the founding family who controls the business with her husband.
The Milan-based company had 2011 fiscal revenues of €2.04 billion, a 31% rise from €1.56 billion the year before. The increase was attributed to growth of the luxury goods industry particularly in Asia Pacific.