M&A Analysis and Research on Garment Industry of P.R.C 2007

Abstract:

1. Status quo and background of M&A in China 's garment industry

A. Profile in garment industry

The number from National Bureau of Statistics of China shows that total output of clothing by costume company nationwide was 17.002 billion pieces in which woven garments shares 8.096 billion pieces and knitted apparel shares 8.864 billion pieces, all three figures increasing 11.86%, 12.48% and 11.17% over last year respectively. Growth rate in production has down lot by 5 percentages compared to the same period of last year. By taking inside look into research from China National Garment Association over number of industry cluster, growth rate of preponderant clusters stays within 10% while minus growth occurred in some cases. Output cross-the-broad in 2006 was 5.12 billion pieces up 10.54% over 2005 and 1.8 billion pieces of woven garments and 3.32 billion pieces of knitted apparel were shown 5.88% and 12.54% in growth over 2005.

Imported garments and clothing accessories in 2006 totaled USD 1.697 billion up 5.5%. Woven garments and imported accessories valued in USD 0.869 billion up 6.55% while knitted apparel and its accessories valued 0.717 billion up 3.11%. Average price of imported clothing is ＄ 2.26 per piece up 11.33%. That number was ＄ 3.71 in woven garments and ＄ 1.57 in knitted apparel up 20.45% and 1.5-1.8% respectively over last year.

The aggregate export of both textile and clothing products in 2006 was USD 147.085 up 25.14% sharing 15.18% in foreign trade in China . The total figure of clothing and accessories was USD 95.19 billion sharing 64.72% in over all textile and clothing export and 9.82% in products export nationwide. Exported clothing reached to 26.622 billion of pieces. Both clothing and accessories and exported clothing have been climbing 28.9% and 21.16% respectively. Exported woven products and accessories valued USD 43.724 billion with 8.472 billion pieces increasing 24.81% and 13.95% respectively while knitted apparel valued 44.901 billion at 18.151 billion pieces growing 45.44% and 24.85% respectively. Trade surplus in clothing and accessories was 93.494 billion sharing 52.68% in total surplus lowering 18 percentages at 70.92%. In 2006, coefficient in garment industry worldwide has been down from 95.7% to 96.5%.

B. Industry performance in 2006

Textile industry remains flourishing during the 11 th Five Year Plan unleashing a record high growth crossing production, sales, export and performance. Along with that, a press for hefty industrial structure and technology rises emerged. The details as followed:

(1) Production remains momentous with seamless output and marketing.

The total industrial number among sizable business in 2006 was at RMB 2461.8 billion growing 21.3% with last year. Sales value was RMB 2410.9 billion up 21.6%; rate on output and marketing reached 97.9% increasing 0.3 percentage points. Yarn output was 17.22 million tons rising 19.9%, fiber at 20.25 million tons growing 12.9%, cloth at 43.8 billion meters with 14.8% of growth. A garment has been 17 billion pieces showing 11.9% of increase.

(2) Economic performance is up too

Operating margins among sizable business stood at 88.3 billion up 28% in which cotton products climbed to RMB 21.8 billion up 33.3%; fiber RMB 6.6 billion and cloth RMB 25.1 billion augmented 41.6% and 29.3% respectively.

(3) No sign of diminishing volume in export

Export to European countries and America has been sluggish plagued by trade friction though, China 's export still represents fast increase globally. In 2006, the whole industry racked in 147.1 billion of bucks with comparative growth at 25.1% in which textile shared USD 52.3 billion and garments at USD 94.8 billion showing rise in 18.8% and 28.9% respectively.

C. the garment industry inaugurated number of characters in 2006

(1) No fluctuation in cotton price

There were no dramatic ups and downs in cotton price thanks to state macro-economic policy. In first half of 2006, standard grade cotton stayed at 14,000 yuan per ton maintaining textile production on the plateau. The price has slumped to 12,600 Yuan per ton by the end of September due to steep sales pressure from stocked Xinjiang cotton compounded with new cotton supply swarmed on the market during the second half of 2006. State has been looking time to stabilize price at 13,000 yuan per ton by the fourth quarter through seeking conditional sale for imported cotton quota and cotton storage, among other solutions.

(2) Booming in output and marketing in fiber products with exhilarating recovery

Following years of industrial transformation, the chemical fiber sector tent to cross a proliferating array of spectrum while proved centralized to large extent along with fix asset investment and production fell rationally. Industrial output in 2006 has been up 21.1% with RMB 315.5 billion, 21.6% in sales at RMB 310.6 billion, 0.3 percentage points up with 98.5% of growth. The untamable price of oil sent the price soaring in polyester that shares 78% of fiber production in the second half of 2006, which directly deliver bounce back for industry. At the same time, the capability of polyester sector to offset pressure from material stream has been spurred up under the huge demand home and broad. Profit return has been RMB 6.6 billion increasing 41.6% in fiber sector in which polyester sector further increase its percentage with 62.8% arrow up at RMB 3.5 billion.

(3) Plummeting in export to Western nations juxtaposed with increased export to free-import-capping regions

There has been noticeable sliding in export to industrialized nations with protocol putting lid on quantity being flowed in. Export to European countries grew 21.7% comparatively at USD 23 billion, which has losing 33.6 percentages while export revenue to America was USD 23.1 billion up 18.1% nose-diving 48 percentages. By contrast, export in non-restriction areas forged ahead inched up 27.7% with 20 percentages at USD 1010 billion. It has gained ground in Hong Kong , Korea , Turkey , Canada and Mexico shown 21.2%, 28.1%, 217.5%, 44.9% and 125% of growth respectively over last year.

(4) Slow down in fix asset investment

In 2006, the fix asset investment in textile industry falling back from over-heating growth and mammoth scale in echoing to national macro-economic policy. The figure was RMB 203 billion busting 27%, which lowered 10.3 percentages over 2005. Cotton investment was RMB 62.3 billion rising 19.8% driving down 35.7 percentage points.

D. escalated competition in domestic garments industry

(1) Costume blockbuster got limelight. Host of companies has matured over years and became striving forces in this sector.

(2) Fierce competition with kaleidoscopic array of products portfolios

(3) Foreign brands in ladies dress have been capable of further increasing its percentage in the whole sector. Data over major retail industry nationwide shown that among top 10 brands, foreign ones have been inched up near 3 percentage points over 2004.

(4) International brands occupy high-end market

2. M&A motive in China 's garment industry

Few cases of M&A domestically to foreign counterparts can be explained with preponderant processing companies in China for foreign costume firms as up-stream sector. Within the context of full open and abrogation of international quota, China 's company is doomed to be in dire straits with cheap cost. M&A in domestic companies have manifested in many aspects:

A. keep abreast with international competition in response to transformation of costume industry in world arena where to compete in overseas has been the goal and proves productive to garment firms.

B. M&A helps optimize corporate structure, set clear duty on the line between ownership and management, reconfigurate industrial resources and mitigate pernicious dog-fight.

C. M&A over up-stream company for putting hands on resources.

3. M&A trend of China 's garment industry

Garment industry is a promising sector crossing the spectrum. China is the nation with the biggest spending in clothing. Low threshold in this sector means not too critical for technology. Market demand has been shifting from quantity to quality and diversification. The scope of business runs gamut from formal suit and evening wear to individualized dress as general-oriented design way up to multi-facets solution. Foreign transaction has been on the crescendo in holistic approach under globalization.

The opportunity and challenge come together in age of world economy. The possibility of international M&A hinged on scale and market advantage in China 's garment industry differentiates it from other industries in terms of sector reshuffle. M&A on the world stage will add high value in both markets home and broad. On one hand, China 's sector will stand a chance to have a horizontal dialogue with foreign companies while obtain resources from images of brand, design capability, consumer acceptability and marketing network. Back home, a Chinese company will became a nimble player endowed with core competitiveness after acquiring foreign brand. The M&A case will shine a spotlight for a Chinese company in image promotion. We found number of character in M&A trend as followed:

A. Big firm takes over medium and small one

B. Tycoon emerged with regional M&A in garment industry

C. M&A by China 's firms in overseas will be rumbling on. By so doing, it will be internationally accepted and manage to circumvent trade barrier.

D. Escalation of M&A from foreign company towards China 's counterparts as to get a processing basis far from uncertainty and with low-budget as well.

E. there has been a spike in diversified expansion by big domestic company who keenly felt pressure from self development. Therefore, possibility for diversified expansion can be sought through accumulating capital.

Top list in China 's garment industry

Content 
M&A Decision-Making Analysis in China’s Garment Industry between 2006 and 2007
Chapter 1 Profile on Study 
Section 1 Background for study 
Section 2 Study contents
Section 3 Study methodology
Section 4 Study team
Chapter 2 The Current Development of Garment Industry Worldwide
Section 1 Character of industrial development worldwide

Section 2 Demand and supply of garment industry worldwide
A. Market scale in garment industry worldwide
B. Regional market of garment industry worldwide
Section 3 Demand trend in garment industry worldwide
A. Spending on upscale clothing 
B. Spending in medium grade
C. Spending in common clothing  
Section 4 Competition in garment industry worldwide
A. Competitive dynamics in garment industry around world 
B. Competitive pattern in garment industry around world
Section 5 Development in America
Section 6 Development in Japan 
Section 7 Development in France
Section 8 Development in Italy

Chapter 3 The Status Quo and M&A Trend in China’s Garment Industry 
Section 1 Character in current China’s garment industry 
A. Industrial operation of China’s garment industry in 2005
B. Industrial operation of China’s garment industry in 2006
Section 2 Demand and supply in China’s garment industry
A. Supply in general
B. Regional structure of garment industry 
C. Product mix of garment industry
D. Density analysis of garment industry
E. Supply forecast in garment industry
Section 3 Demand of China’s garment industry
A. Current demand in China’s garment industry
B. Spending in China’s garment industry
C. Demand trend in China’s garment industry
Section 4 Export and import of China’s garment industry
A. Import 
B. Export 

Chapter 4 China’s Garment Industry in Categories 
Section 1 Casual wear
Section 2 Suit 
Section 3 Men's clothing
Section 4 Lady's clothing
Section 5 Kids' clothing

Chapter 5 Demand and Supply of Raw Material Market 
Section 1 Demand and supply of cotton 
A. Cotton supply in general 
B. Regional supply of cotton 
C. Demand for cotton 
Section 2 Polyester 
A. Polyester supply in general
B. Regional supply of polyester
C. Demand for cotton polyester
Section 3 Other supply 
A. Flax
B. Silk 
C. Fur

Chapter 6 Investment Policy Environment of China’s Garment Industry 
Section 1 Macro-economic policy on garment industry 
Section 2 Industrial policy on this sector 
Section 3 WTO on China’s garment industry 

Chapter 7 Factor Exerting Influence on China’s Garment Industry
Section 1 Life cycle of China’s garment industry
A. Market scale 
B. Growth trend 
C. Degree of competition
D. Profitability 
E. Conclusion 
Section 2 Competition risk in garment industry 
A. Entering barrier 
B. Exit barrier 
C. Competing models 
D. Advantages and disadvantages in China’s garment industry 
Section 3 Existing problem of China’s garment industry 

Chapter 8 Regional Business Climate and M&A Trend in China’s Garment Industry 
Section 1 Northeast region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility 
Section 2 North region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility
Section 3 Central China 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility
Section 4 South region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility
Section 5 Southwest region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility
Section 6 Northwest region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility
Section 7 Eastern region 
A. Regional character and industrial pattern 
B. Regional competitiveness 
C. M&A trend and feasibility

Chapter 9 Current M&A of China’s Garment Industry 
Section 1 M&A background 
Section 2 Current M&A of China’s garment industry
Section 3 M&A trend of China’s garment industry 

Chapter 10 Stumbling Stone in China’s Garment Industry
Section 1 Policy 
Section 2 Capital 
Section 3 Brand
Section 4 Market 
Section 5 Organization 

Chapter 11 Case Study of M&A in Garment Industry Overseas
Section 1 VF acquired Nautical 
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration 
Section 2 Columbia Sportswear purchased Pacific Trail Inc.
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 3 Chantelle acquired Orcanta 
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 4 Jones Apparel Group took over Barneys New York 
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 5 Claiborne purchased Juicy Couture
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 6 Fast Retailing purchased Theory
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 7 Marzotto took over Hugo Boss
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 8 Esprit purchased Esprit North America
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 9 Delta purchased M.J.Soffe
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 10 Adidas acquired Reebok
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 11 Kellwood Company purchased Glenn Children's Clothing Company
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration

Chapter 12 M&A by Foreign Company over China’s Counterparts 
Section 1 Development of foreign firms in China
A. Investment 
B. Targeted area for investment
C. Character for investment 
D. Investment product mix 
E. Market performance
Section 2 GabrielleChanel
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility 
Section 3 Louis Vuitton
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 4 Dior
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 5 Versace
	A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 6 Prada
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 7 Burberry
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 8 Kenzo
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 9 Givenchy
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 10 Valentino
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility
Section 11 Hugo Boss
A. Investment in China 
B. Core competitiveness
C. M&A trend and feasibility

Chapter 13 Foreign Company Waiting for Entering into China’s Market 
Section 1 ＯＮＹＯＮＥ
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 2 ARMATA
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 3 Korean Lybion
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 4 Carhartt
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 5 Gerry
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 6 SuanDunn
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 7 JaneSinger
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 8 LloydKlein
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China
Section 9 Wisher
A. Corporate performance 
B. Core competitiveness 
C. Background and motive 
D. Investment and feasibility in China

Chapter 14 Case Study of M&A in Domestic Garment Industry 
Section 1 Wensli Group purchased ShangHai Lian Hua Fibre Corporation
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration 
Section 2 Shanghai Conch Apparel Co., Ltd. took over Chengdu Garment Group
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration
Section 3 Guangdong Rieys Group Company Ltd.  willing to take over four companies
 including Guangdong Gangwei Apparel Co., Ltd.
A. Motive and value 
B. Procedure 
C. Solution and lesson 
D. Strategic integration

Chapter 15 Competitiveness among Major Players in China’s Garment Industry 
Section 1 Hongdou Group Co.
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility 
Section 2 Youngor Group Co., Ltd
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 3 Inner Mengolia Erdos Cashmere Group Corporation
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 4 Inner Mengolia Shi Qi Group
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 5 Fujian Septwolves Industry CO. Ltd.
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 6 Baoxiniao Group Co., Ltd.
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 7 Wensli Group Co., Ltd.
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 8 Ningbo Shanshan Co., Ltd
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility
Section 9 Shanghai Conch Apparel Co., Ltd.
A. Corporate structure 
B. Productive capability 
C. Operating capacity 
D. Marketing savvies 
E. Corporate strategy 
F. M&A trend and feasibility

Chapter 16 Current M&A and Trend Between Up-stream and down-stream Sector in China’s
 Garment Industry 
Section 1 M&A background for garment company taking over up and down stream company 
Section 2 Case study of M&A in garment company taking over up and down stream company
Section 3 M&A trend of garment company taking over up and down stream company
Section 4 M&A possibility of garment company towards other sectors

Chapter 17 M&A Possibility in China’s Garment Industry at Different Scale 
Section 1 M&A possibility among big companies 
Section 2 M&A possibility among medium companies
Section 3 M&A possibility among small companies

Chapter 18 M&A Risk in China’s Garment Industry 
Section 1 Asset reshuffle 
Section 2 Brand portfolios
Section 3 Change in personnel 
Section 4 Corporate management 
Section 5 Entrepreneurial culture 
Section 6 Corporate strategy 

Chapter 19 Recommendation for China’s Garment Industry 

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