22 January 2008
IACANGELO Salvatore, IANKOV Nikolay,
MALIAROV Dmitry, POSSAVINO Regina
Table of Contents
1. Economic Rationale of the Venture3
2. Differences In Valuating an Identical Project in a Domestic Setting5 3. Price of the Deal5
1. Economic Rationale of the Venture
After the recession of the Western European textile industry substantial technology investments enabled the Western European textile manufacturers to compensate for their labor-cost disadvantage versus competitors producing yarn and fabric in less developed countries. Consequently, more and more Western European textile companies decided to focus on highly automated, high-quality yarn and fabric production in Europe while leaving the labor-intensive garment production to the competitors in less developed countries. However, in order to gain significant market share in the Western European market, low-cost producers were required to improve their product quality and their marketing with specific know-how and design expertise to meet the customer’s demand. Western European manufacturers though wanted to keep control of the entire production chain as well as of their brands while outsourcing the labor-intensive production steps to the largest extent possible. PRINCE had a domestic customer base. In order to boost its exports and gain a share in the European market, PRINCE was looking for a partner with state-of-the art manufacturing know-how, recognized design competence and established market access. At the same time, JERSEY was willing to expand its manufacturing interests to lower labor-cost countries of the Mediterranean area taking advantage of the low labor costs, the recently improved trade relationships with the EEC and the availability of governmental subsidies favoring industrial development with...