MINICASE Luxury Wars

United States, France, Germany, and Western Europe. Hermes International is a multi-billion dollar French origin owned and controlled by the Hermes family. The business makes and sells luxury goods across numerous reaping categories. After being passed down through several generations the connection distinct to tilt its sh ar on the man market for the reasons listed below To give up family members with a means to value their s do in the company To stick out partial cash-outs if dividends alone were insufficient, knowing that just about family members were known to maintain bounteous lifestylesTo raise capital while still being able to twine important decisions (like electing the CEO or Chairman), and still controlling the strategic and working(a) decisions of the firm To obtain financing that would support the long term using of the company and to accommodate ease of trading for parcel of landholders in transfer of ownership. B. What risks comes from a public listing? Amidst the several advantages of pass public there atomic number 18 equally associated risks for a company to consider when making such decisions.The list below, while not exhaustive, identifies some of the risks associated with a company ongoing public The agency problem. When a company goes public it runs the risk of minimal interest. The dominance for this conflict comes along as the objective of management and owners may not be aligned. Note that in the case of Hermes International for the first sequence ever the current CEO is not a family member. Without adequate controls going public hobo distort long-term vs.. Short-term value minimization. privately held firms usually have long-term value minimization while in public held firms tend to focus on quarterly earnings.Earnings now have to come across shareholders and not just support the Emily. Focus on profitable harvest may change as decisions taken may be agreeable with impatient capitalism. Things happen in the com pany 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 substitute(prenominal) market and no control over equity swaps on some amount of the companys shares) Loss of confidentiality and flexibility due to regulations of the security and exchange commission.Vulnerability to take over should the stock 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 exposed after going public, there are measures can be taken to minimize the impact of the risks to shareholders, These controls can come in the mental strain of stock options (restricted or open), management compensation packages, or an instituted holding company to represent and manage shareholders.