A Trend Towards Market Consolidation? A Survey of 2023 M&A Transactions in the Fashion and Luxury Sector
Over the last year, the global economy has grappled with continued macroeconomic uncertainty, the still ongoing Russia-Ukraine conflict, rising inflation, and decreased consumer spending.[1] Against this backdrop, fashion brands have sought to find innovative strategies to navigate these challenges and prioritize their long-term growth.[2] Rather than relying on the traditional tools of individual brand strength and design prowess, the luxury market has turned to consolidation via M&A transactions.[3] This strategy has enabled brands to streamline operations, share best practices, and optimize procurement, resulting in potential cost synergies that could counterbalance inflationary pressures and changing consumer preferences.[4] In addition, this creative solution has provided fashion conglomerates, like LVMH, Kering, Tapestry and the like, with the opportunity to further increase and scale their capabilities into new international markets and product areas, while also making it more difficult for independently-owned brands to compete with their portfolios.[5]
In 2023, a number of M&A deals, strategic partnerships, and funding rounds have brought together some of the biggest names in the global luxury industry.[6] The below section provides an overview of the recent fashion and luxury deal market and highlights some key transactions in the space over the past six months.
2023: Winter Comes Early with a Flurry of M&A Activity
April: L’Oreal to Buy Skincare Brand Aesop in $2.5 Billion Deal
Starting the spring off strong, French skincare giant, L’Oréal SA, agreed to acquire the upscale Australian cosmetics brand, Aesop, for an enterprise value of $2.53 billion.[7] This deal would bring Aesop under the same umbrella as brands such as Garnier and Maybelline.[8] Aesop sells its products, which include hand wash, body lotions, and perfumes, in 29 markets, including mainland China.[9] As L’Oreal’s CEO Nicolas Hieronimus noted, “Aesop taps into all of today’s ascending currents” and this deal would allow for L’Oreal to continue to grow into the Chinese consumer market.[10]
July: Kering to Acquire 30% Stake in Valentino
Heating up in July, luxury goods group Kering announced that it would be acquiring a 30 percent share in Valentino from parent company Mayhoola for cash consideration of €1.7 billion. [11] As a result of this move, Kering will become a significant shareholder with board representation.[12] This deal comes as Kering seeks to revitalize some of its core brands (e.g., Gucci, Saint Laurent, Balenciaga, Bottega Veneta) as its growth has lagged behind that of its rival, LVMH.[13] As reflected in a comment made by François-Henri Pinault, chairman and CEO of Kering, Valentino is seen as “very complementary” with the rest of the Kering portfolio of brands and Kering hopes the strategic partnership will support brand elevation.[14]
July: Richemont Acquires Controlling Stake in Gianvito Rossi
In the same month, but via a private transaction, Swiss luxury group Richemont acquired a controlling stake in Gianvito Rossi, the Italian luxury shoemaker.[15] Gianvito Rossi, who serves as the CEO and Creative Director of the brand, “will retain a stake in the company and continue to nurture and develop the Maison.”[16] This deal highlights that consolidation is being used not only as a tool for global expansion and brand recognition, but also as a method of establishing new creative partnerships between fashion house directors.
August: Advent Takes Majority Stake in Zimmermann for Nearly $1 Billion
Private equity investors have also made inroads into the luxury goods space this year. Notably, in August, the private equity firm Advent International acquired a majority stake in Australian fashion brand Zimmermann.[17] Although financial details were not disclosed, the transaction values Zimmermann at around $1 billion.[18] In a joint statement, the parties to the deal explained that “the investment by Advent will allow Zimmermann to speed up expansion abroad including in Asia and the Middle East and boost its distribution network.”[19] Once again, this strategic investment signals that luxury fashion brands are utilizing the M&A landscape to tap into new consumer markets and escape the decline in consumer discretionary spending being experienced in North America.
August: Tapestry to Acquire Capri Holdings in $8.5 Billion Deal
Shocking the fashion and luxury M&A market in August, Tapestry, the parent of Coach and Kate Spade, announced that it was planning to acquire Capri Holdings, the parent of Versace and Michael Kors, for about $8.5 billion in cash.[20] Combined, the two groups are expected to generate about $12 billion in revenue and will bring together iconic fashion brands such as Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo, and Michael Kors.[21] This deal between some of the largest American fashion conglomerates has been described as the “boldest effort yet by American fashion executives” to build a competitor to European giants such as LVMH and Kering.[22] Ultimately, this deal reflects the ongoing trend of consolidation in the global luxury industry and the competition for a loyal consumer base.
September: LVMH’s Thelios Acquires French Eyewear Brand Vaurnet
As temperatures have started to cool off during the fall season, the M&A market has not. In September, French luxury house LVMH announced that its eyewear unit, Thelios, had acquired the French sunglasses brand, Vaurnet, from NEO Investment Partners.[23] This deal, which marks the first brand acquisition for Thelios, which designs and produces eyewear for Dior, Fendi, and Givenchy, was made with the hopes of “restoring the brand’s former glory” and expanding its “know-how” in the market.[24]
What Does This All Mean?
As the most dominant luxury players around the world wrestle to broaden their portfolios, independently-owned brands may struggle to stay in the ring.[25] For fashion conglomerates such as LVMH, Kering, Tapestry, cumulating brands and expanding their market potential can bring significant cost savings.[26] On the other hand, continued consolidation of the fashion and luxury industry will likely place substantive pressure on smaller companies and independently-owned brands to increase annual revenue or risk being pushed out of the fashion space altogether.
Footnotes
