Mergers and acquisitions (M&A) in the fashion and luxury sector are currently stalled, as revealed in a recent PwC survey. «In terms of value, Italy experienced a 51% decrease due to a significant reduction in large-scale operations and those sponsored by funds and financed by leveraged buyouts, compared to middle market transactions promoted by industrial operators», the «PwC Global & Italian M&A Trends in Consumer Markets» study highlights.
The analysis also reveals the foreign trend. Globally, the data are similar, with a 17% drop in deal volumes and a 48% decline in value. 2024 started with the delisting of Tod’s by L Catterton and the acquisition of Autry by Style Capital, resulting in a significant profit for Alessandro Binello’s Quadrivio. There are also high expectations for the listing of Golden Goose, as well as other operations in the leather goods sector, along with ongoing processes involving brands such as Twinset, Missoni, and Arena, while Trussardi is being rescued by Miroglio.
«M&A in the fashion and luxury sector has slowed due to market conditions, which are normalizing after years of a post-Covid boom», Kearney analyst Dario Minutella explains to MFF. «Since several brands remain family-owned with issues of succession and generational turnover, there are opportunities for capital opening».
Furthermore, the Antitrust decision regarding Tapestry’s takeover of Capri holdings is still awaited. The decision could lead to a rationalization of the brand portfolio, including the Italian Versace. «In 2024, and with signs already emerging at the end of 2023, the scenario is changing, but not for all groups», Alberto Gennarini from the consulting firm Vitale notes. «Kering is struggling significantly, with its share price dropping from a peak of 546 euros to around 328 euros, a 40% loss. Lvmh has stable results, though some product categories are in decline, leading to a recent stock performance of around -15%. In contrast, Hermès has seen a 15% increase in stock performance over the last year, and Chanel had a record financial year, growing by about 16% to reach a revenue of around 20 billion euros».
In the fashion sector, including both the supply chain and luxury, the focus is on potential movements by operators who might consider investing or forming alliances to strengthen their online presence, especially with the closure of unprofitable retail stores. As for distribution, for instance, Ovs has been historically active in both Italy and abroad, Cisalfa acquired a company in Germany, and several processes involving other clothing chains have been ongoing since 2023. Meanwhile, the e-tailers sector is facing a significant crisis, with major players undergoing extraordinary operations and reorganizations.
«The transfer of Farfetch, acquired by the Korean Coupang in December 2023, remains stalled, with Coupang announcing its intention to divest brands managed by New Guards Group, for which Roberta Benaglia’s Style Capital had shown interest», Minutella continues. «This transitional phase is normal, and the next two years will be crucial to determining whether we are seeing a market trend shift or just an adjustment that will allow the luxury sector to restart». He adds, «In this market context, many advisors have recommended their clients wait until the second half of 2024 to observe stock market trends and assess whether conditions will be favorable for a potential rebound».
He also suggests a cautious outlook: «I believe we will have to wait until 2025 to fully understand the future prospects of the luxury sector». This cautious stance contrasts with ceo Livio Proli’s recent projections for Missoni, as discussed in an interview with MFF. Five years after Fsi’s entry, Missoni, with revenues of 125 million euros, faces two potential scenarios. One option is selling to an industrial partner, with Rothschild as the advisor. The other option is to continue operating independently. «The shareholders are not in a hurry», ceo Livio Proli told MFF.
As the Brand, still majority-owned by its founding family, prepares for the acquisition of a supply chain partner, it has completed the project for its new flagship store in Milan and accelerated its real estate initiatives. Analysts observe that despite signs of declining inflation and interest rates, investors will need more time to understand the market’s evolution, especially as regards inflationary impacts on costs, energy, selling prices, and the ability to maintain the profit margins achieved in late 2023 and early 2024.
«This uncertain environment will lead to fewer transactions and greater caution when applying valuation multiples», Minutella observes. A recent study on acquisitions highlights that as the luxury sector normalizes, clothing companies are increasingly valued based on profits rather than sales, resulting in lower payouts for founders and investors.
The survey, which analyzed several recent transactions in the fashion industry, also highlights the «scarcity of buyers, including private investors and strategic conglomerates», noting that many recent deals, such as Tapestry’s acquisition of Capri holdings, are yet to be consolidated. However, «There are always exceptions. Strong brands like Tod’s, which are progressing to their next steps, have successfully concluded major deals. And I believe more will follow», Minutella concludes. (All rights reserved)
