A definition of luxury comes from Euromonitor delimiting it to 75 large companies present in different areas, for a total revenues of $ 200 billion, with an average figure of 2,3mld and with smaller companies that bill around 200 million.
The first ten companies of this list account for 55% of the totality of the brands; all luxury companies except for Chanel are included in the list. LVMH is the biggest with a value of 21 billion dollars. Italy is only represented by Luxottica taking the fourth place on the list. The second position is taken by the Swiss Richemont, followed by Estée Lauder, ending finally with Swatch Group and Kering.
Since 2000, the process of M&A’s are driven by three factors: globalization of the brand, vertical integration, consolidation to achieve economies of scale.
Italian luxury firms don’t stand out when talking about M&A’s, they haven’t for the past 15 years. Italy has 23 companies on Euromonitor list, but apart from Luxottica, these are far behind and small sized; but still accounting for 30% of all luxury firms. Prada is positioned in 14th place, Giorgio Armani at the 20th, Only The Brave on the 23rd, the 26th Max Mara, Ermenegildo Zegna to the 27th, the 28th Safilo, the 29th Salvatore Ferragamo, Tod’s on the 32nd, 33rd at the Dolce & Gabbana.
If you notice, since 2000, the external growth was very important, but for Italian companies is not significant. We made a few combinations and acquisitions but we were mostly acquired.
Between 2000 and 2009 the Frenches have made 32 transactions, Americans 31 operations and in recent years, 13 operations by the Chinese companies.
French brands continue to be very active and now Asians are doing the same. We are the prey.
From 2000 until the end of the first half of 2014 we can count about 600 acquisitions of Italian luxury. The deals, which were successfully closed from 2010 to the end of June 2014, are 126.
The most interesting aspect to underline concerns the geographical origin of buyers: in the period 2000-2009 on average 80% of the transactions had a connotation home, while from 2010 to now this proportion dropped to 55%, demonstrating how the field of Fashion & Luxury both extremely attractive to foreign capital.
A further confirmation of this dynamic is obtained by observing how operations 11 to 20 in the first half of 2014 are attributable to foreign operators.
It is also significant to note that, while in the decade up to 2009, the most active buyers of Italian luxury companies were Western investors (France, United States, United Kingdom), in recent years has gradually consolidated the position of the new emerging countries: from China to Korea, from India to Thailand, the United Arab Emirates and Qatar to Singapore.
Finally, the intervention of private equity funds linked to this phenomenon is more pertaining to recent years, from 2007-2008; it is characterized by the presence of large multinational US funds and not only with the ability to view on all markets.
As for vertical integration, “this is another element that has favored M&A.” One example is Kering “which acquired the producer of raw materials for the production of bags. Acquisitions that have served to ensure the raw materials and processing proper. But also downstream operations, on sale, such as Coach, which has acquired all Asian distributors directly entering the market. Another factor, which are careful particularly the French, the consolidation to achieve economies of scale. To this was especially careful Kering, which acquired Pomellato and should be seen in this logic. ”