The Takeover of Warnaco by PVH

Master's Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 2,0, University of Mannheim, course: Corporate Finance, language: English, abstract: The process of completing a merger of several companies or an acquisition of a company is a complex one, involving many different aspects. First, there is the target at hand, and the value of the very same. Second, it is to be determined which positive effect a combination of the businesses may have. Third, the interests of all involving stakeholders such as management, shareholders, investors or the workforce are to be recognized in the process. All of the above is dealt with by the parties involved and may lead to a merger agreement and a price to be paid. The question to be asked by academia is whether or not the price that has been agreed upon, was correct. Of course, this is a question of perspective and, at the same time, of the information available.To answer this question, this thesis will make use of the transaction between PVH Corp. (PVH) and Warnaco Group (Warnaco), two American apparel companies, which on October31st, 2012 announced that their businesses are to be combined by an acquisition of Warnaco through PVH. The deal was closed in February 2013.The structure of the thesis is as follows. First, the market both companies operate in is analyzed, involving a market overview, a five forces analysis and a future outlook. Then a detailed description of the two companies follows, including their respective products, structures and histories. The picture will be rounded off by analyzing the deal rationale, deal characteristics and by giving a chronology of events related to the acquisition. The second part deals with the valuation of the companies using relative and fundamental valuation methods. Also incorporated in the fundamental valuation part, is a valuation of potential synergies. The third part then makes use of event study methodology to analyze whether the deal as a whole and price where reasonable according to stock marketassessment. A conclusion will then put together the results of all the conducted analysis and answer the question whether or not the transaction price was correct.