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International fashion and luxury sector M&A rising 30%, Italians account for 25%

by Marta Casadei

The number of mergers and acquisitions in the international fashion and luxury sector rose about 30% on the year to 96 in 2016, compared to 75 in 2015, and 89 in 2014, research by the Pambianco Strategie di Impresa agency showed.

Last year’s figure still does not equal the records registered in 2013 (106 mergers and acquisitions) and 2012 (114) but it sheds new light on a sector that appears to have regained some energy after the tepid performance of the year before.

A mix of factors influenced the increase in activity.

“On one hand, there are the accounts of the companies, which are improving,” said Alessio Candi from Pambianco, one of the authors of the report. “On the other, the substantial liquidity that big groups are dealing with. Investing in companies with high potential, which can grow significantly with new capital injections and strategies, is an excellent way to use capital and to obtain advantageous returns in a moment in which the stock market is subject to volatility and alternative financial instruments, such as bonds, are not profitable.”

On the M&A front, the market is dominated by holdings and private equity funds, categories that all together carried out about 40% of the deals in 2016.

Holdings were in fact the most active: in the last 12 months, they concluded 21 mergers and acquisitions. Highlights of these at the international level included Chinese conglomerate Gangtai’s purchase of a majority stake in Italian high-end jeweler Buccellati and Qatari Mayhoola for Investments’ purchase of French fashion house Balmain.

In June, the financial arm of the Qatari royal family, which already has Italian labels Valentino and Pal Zileri in its portfolio, bought Balmain International, which owns the French fashion house, for €485 million.

The second acquirer in terms of number of deals was private equity funds. They were involved in 18 mergers and acquisitions in 2016, which was nevertheless down 28% compared to the year before. The most prominent deals involving funds included the purchase of footwear label Philippe Model by 21 Investimenti, and French Ams Industries’ buy of fashion brand Tara Jarmon.

If in past years, holdings tended to be more interested in former suppliers or firms that could complete the verticalization of the industry to increase productivity, and at the same time, boost control of production, today they are setting their sights on firms further down the supply chain.

“The most appealing are the small companies with high potential. I’m thinking of Italian companies with strong brand awareness whose €50-€60 million turnover could rise to €300 million with an efficient international development plan,” said Candi.

To reinvest their liquidity, holdings are targeting the acquisitions of brands, even with minority stakes as happened in the case of G-III, a US holding that bought 19% of Karl Lagerfeld, or of Hermès, which took a stake in French footwear brand Pierre Hardy.

Many of the most appealing companies continue to be found in Italy: this is reflected in the geographical distribution of deals. While more than half (55%) took place abroad by foreign companies, M&A among Italian companies – including deals such as Sator-Boccaccini, Damiani-Venini and Armonia-Aspesi, amounted to 24, equal to 25% of the total, while seven Italian firms (or stakes in them) were bought by foreign firms (7%).

“Above all on the high-end front, Italy remains a reference point, together with France. And it continues to be in the sights of investors, both Italian and foreign, especially Asian groups,” said Candi.

“On the other hand, Italian companies are becoming more willing to use their own capital than they were in the past, both due to the generational shift underway and the need to grow at the global level, where finance becomes a fundamental lever.”

Foreign purchases by Italian players increased and included the acquisition of 80% of US clothing firm Woolrich on the part of WP Lavori in Corso. In 2016 there were 12 such deals, equal to 13% of the total.

Among new developments that emerged from Pambianco’s analysis is the growing role of distribution and retail companies, which carried out 12 mergers and acquisitions in 2016, a trend that could grow further in 2017.


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