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Micro-Exercise 5: Funding Luxury M&A – Family Equity vs. Acquisition Debt & Put/Call Options
Micro-Exercise 5: Funding Luxury M&A – Family Equity vs. Acquisition Debt & Put/Call Options
💎 THE STORY BEHIND THE NUMBERS: How Do You Pay for a €4.5 Billion Luxury Brand Empire? IPO Equity, M&A Bank Debt & Founder Put/Call Options!
💎 THE STORY BEHIND THE NUMBERS: How Do You Pay for a €4.5 Billion Luxury Brand Empire? IPO Equity, M&A Bank Debt & Founder Put/Call Options!
THE STORY BEHIND THE NUMBERS: Financing a Luxury M&A Empire (Page 77 & Page 283 of Report)
In Module 3, Team 5 discovered that Puig Brands holds EUR 8,548 million (8,547,614 thousand EUR) in Total Assets, dominated by 4,598,653 thousand EUR in Goodwill and Intangible luxury brand trademarks (Charlotte Tilbury, Byredo, Dr. Barbara Sturm, Rabanne, Carolina Herrera). Now, inspect the Right Side of Puig's Balance Sheet (Page 77 summary chart & Page 283 full Consolidated Balance Sheet) to see how the Puig family financed those multi-billion-euro acquisitions!
1. The Post-IPO Equity Boost (+11% YoY to 45.8% Total Equity):
Before 2024, Puig used substantial acquisition debt to buy majority stakes in iconic founder-led luxury brands. Then, in May 2024, Puig executed one of Europe's largest luxury IPOs (raising primary equity on the Spanish Stock Exchange while the Puig family retained voting control), followed by strong net profits in 2024 and 2025 (EUR 594 million attributable to the parent company in 2025). As a result, Total Equity (KW) grew by +10.6% (+11% YoY) from 3,537,684 thousand EUR in 2024 to 3,911,842 thousand EUR (EUR 3,912 million) at year-end 2025 -- driven by 4,058,057 thousand EUR in Reserves and retained earnings and funding 45.8% (46%) of the Balance Sheet!
2. M&A Bank Debt, Put/Call Liabilities & Passing the Silver Rule of Financing (KW/KO = 84%):
What sits inside Puig's Total Liabilities (KO) of 4,635,772 thousand EUR (EUR 4,636 million = 54.2% / 54% of Total Equity & Liabilities)?
- Non-current liabilities -- ZD (2,382,193 thousand EUR / EUR 2,382 million = 27.9% of funding): This includes long-term Non-current bank borrowings (718,327 thousand EUR) used to finance luxury acquisitions, Deferred tax liabilities (622,130 thousand EUR) arising from brand trademark valuations, and Provisions and other liabilities (1,041,736 thousand EUR, including long-term boutique lease liabilities and Put/Call option liabilities committed to minority founders of acquired brands like Charlotte Tilbury and Byredo, where Puig commits to buying their remaining shares in future years!). Adding Equity (3,911,842) + Non-current liabilities (2,382,193) gives Permanent Capital (KS) of 6,294,035 thousand EUR -- meaning 73.6% (74%) of Puig's funding is locked in for the long term!
- Current liabilities -- ZK (2,253,579 thousand EUR / EUR 2,254 million = 26.4% of funding): Current bank borrowings (634,189 thousand EUR), Trade accounts payable (245,164 thousand EUR), and Other current liabilities (1,337,065 thousand EUR).
- Testing the Golden (1:1) & Silver (1:2) Rules of Financing (KW / KO): Dividing Puig's Total Equity (3,911,842 thousand EUR) by Total Liabilities (4,635,772 thousand EUR) yields an Equity-to-Debt ratio of 84.4% (84%) (up from 70% in 2024!). Because 84% is below 100%, Puig fails the strict 1:1 Golden Rule (its M&A debt still slightly exceeds equity), but because 84% is well above the 50% Silver Rule threshold (minimum 33.3% equity / max 66.7% debt), Puig comfortably passes the Silver Rule of Financing!
📋 WORKFLOW FOR TEAMS 1–5: Paper First, Screen Second!
Use your printed paper worksheet as a scratchpad to extract the Y2024 figures from the PDF report and calculate your ratios. Once you have written down and rounded your answers on paper (whole numbers only, no decimals!), transfer them into the interactive online form below and click Check until every box turns 100% Green! Keep your paper worksheet ready for our live classroom comparison!
Guided Exercise (Team 5 - PUIG BRANDS): 4 Key Capital Structure Ratios & Financing Rules
Guided Exercise (Team 5 - PUIG BRANDS): 4 Key Capital Structure Ratios & Financing Rules
Goal: Analyze the right-hand side of Puig Brands' Balance Sheet (Equity & Liabilities): check how Puig strengthened its equity share after its IPO, evaluate its Permanent Capital (KS), and see why it fails the strict 1:1 Golden Rule (<100%) but comfortably passes the 1:2 Silver Rule of Financing (>=50%).
Worked Example: Step-by-Step for 2024 (Page 283 of the PDF in EUR thousand)
STEP 0: OBTAIN THE ANNUAL REPORT HERE
STEP 1: Find 4 numbers on the Equity & Liabilities side in 2024 (in EUR thousand, 2024 column on Page 283):
[A] TOTAL LIABILITIES AND EQUITY (Page 283, bottom row): 8,603,200
[B] TOTAL EQUITY - KW (Page 283, middle grey row): 3,537,684
[C] TOTAL LIABILITIES / DEBT - KO (Page 283: 3,262,206 + 1,803,310, or [A] minus [B]): 5,065,516
[D] TOTAL NON-CURRENT LIABILITIES - ZD (Page 283, middle subtotal): 3,262,206
STEP 2: How the 4 Key Capital Ratios are calculated (2024 Example):
1. Equity Growth YoY (%): Base Year (In 2025, you will compare 2025 Equity against 3,537,684).
2. Equity Share in Balance Sheet (%): ([B] / [A]) * 100% = (3,537,684 / 8,603,200) * 100% = 41.1% -> 41% (Debt Share = 59%).
3. Permanent Capital Share - KS (%): (([B] + [D]) / [A]) * 100% = ((3,537,684 + 3,262,206) / 8,603,200) * 100% = 79.0% -> 79%.
4. Golden (>=100%) & Silver (>=50%) Rule of Financing (KW / KO): ([B] / [C]) * 100% = (3,537,684 / 5,065,516) * 100% = 69.8% -> 70% -> FAILS Golden Rule (<100%), PASSES Silver Rule (>=50%)!
Your Turn: Task for Team 5 (Calculate 2025!)
Look at the 2025 column on Page 283 and complete the exact same steps for 2025 (round percentages to whole numbers, no decimals):
STEP 1: Find the 4 numbers for 2025 (in EUR thousand):
[A] TOTAL LIABILITIES AND EQUITY (Page 283, bottom row) = ....................
[B] TOTAL EQUITY - KW (Page 283, middle grey row) = ....................
[C] TOTAL LIABILITIES / DEBT - KO ([A] minus [B], or 2,382,193 + 2,253,579) = ....................
[D] TOTAL NON-CURRENT LIABILITIES - ZD (Page 283, middle subtotal) = ....................
STEP 2: Calculate the 4 Key Ratios for 2025 (whole %, no decimals):
1. Equity Growth YoY (%) = (([B]_2025 - 3,537,684) / 3,537,684) * 100% = .......... %
2. Equity Share in Balance Sheet (%) = ([B]_2025 / [A]_2025) * 100% = .......... %
3. Permanent Capital Share - KS (%) = (([B]_2025 + [D]_2025) / [A]_2025) * 100% = .......... %
4. Equity-to-Debt Ratio (KW / KO %) = ([B]_2025 / [C]_2025) * 100% = .......... % (Passes Golden >=100% or Silver >=50%?)
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