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Transforming Italian luxury market

Translated by

Nikola Mira


July 23, 2021

The impact of Covid’s pandemic is disrupting the luxury industry in general, especially Italy. After reviewing retail organizations to close stores and shut down production, in 2020 the label was forced to rethink its business model by accelerating the pace of digital transformation and promoting sustainable development. This process requires a large investment. Many labels had no choice but to look for new investors and partners, as evidenced by a series of acquisitions announced in recent months.For example Etro, Recently 60% stake L Catterton, Zegna ZegnaLVMH is about to be listed on the New York Stock Exchange and has purchased a majority stake in off white After taking full ownership of on Tuesday Emilio Pucci last month.

Etro’s Spring / Summer 2021

Acquisitions are doubling in the Italian market, as the Italian manufacturing industry is rich in hidden jewels and small businesses, so-called pocket multinationals, are still owned by the founder’s family. What’s more, more than ever, Italian products have an undeniable appeal in the luxury market, which is hungry for genuine, well-established brands. At the same time, less robust labels struggling for a pandemic had to rely on state aid. Corneliani Avoided bankruptcy earlier this year, thanks to new funding from shareholders Investcorp, And with the help of the Italian government. Some labels have been preyed on by larger groups and Italian investment funds.

In December 2020, Moncler bought and rolled the ball Stone island, The outstanding name of Italian luxury sportswear.Next month, budget fashion chain OVS Acquired Stephanel’s trademark and retail organization. In March, Renzo Rosso’s holding company OTB (Only the Brave) announced the acquisition of the German label Jil Sander, already operated by the Italian company Onward Luxury Group.

at the same time, made in Italy Fund, an investment fund operated by management company Quadrivio Group as a joint venture with telecommunications company Pambianco, has purchased labels for modern ready-made garments. DondupIt’s been 5 months since I signed the contract to buy the luxury streetwear label GCDS. In June, Chinese textile and apparel group Fosun acquired luxury shoe label Sergio Rossi. A few days ago, Sicilian fashion retailer said it would apply for a listing on the Milan Stock Exchange.

Strategic and tactical reasons

“There are two reasons behind the surge in the number of acquisitions. The first is strategic. The industry is becoming more difficult. The digital revolution accelerated by Covid has to spend on companies. The number of disciplines has doubled. ” Luca Solka, Bernstein’s Senior Luxury Analyst. “The other is more tactical. It may have reached a peak of multiples of the rating. After the results of the first half of 2021 [will be published], 2021 and 2022 estimates will be revised upwards, and multiples of the rating will gradually weaken, “he added.

In general, competition is fierce and more and more investment is being made in areas such as distribution, product development, advertising, digitization, supply chain sustainability and overseas expansion, especially in China, a key market in this sector. It’s getting fierce. In 2020, luxury labels will be promoted to reduce costs, streamline operations and organize balance sheets to overcome the Covid crisis, and 2021 looks like a year of integration. For a stronger group that has survived the crisis thanks to its underlying power and low debt, this is definitely the right time for a merger and acquisition.

The list of Zegna is set to be done via SPAC with the Italian holding company Investindustrial-© Pixel Formula

“The market was expected to be vibrant. On the one hand, there are already digitally established luxury giants and labels, and on the other hand, highly specialized or single. Product labels, and a number of medium-sized ones that struggled hard last year. To recover and stay competitive, you need funding, a partner or mutual fund, “said the merger in the luxury and fashion world. Gianluca Ghersini, a lawyer at Gianni & Origini, a company that specializes in acquisitions, said. ..

Ghersini states that private equity firms, large luxury groups and holding companies are major market predators.

Italy’s textile and apparel sector, which employs 45,000 companies and 400,000 workers, estimates total revenues from € 56 billion in 2019 (of which € 32.8 billion will be exported), according to estimates by Sistema Moda Italia (SMI). It decreased to 42.6 billion euros. In 2020, there were exports worth € 27.5 billion.

“Some predators are looking for opportunities from private equity firms, large luxury groups, financial holding companies, or labels that have been successful in the past and can be reopened. The Covid crisis has accelerated the process. Only, “Ghersini said. “Small businesses alone cannot survive, so significant integration is expected. They do not have the ability to cope with the additional costs incurred by pandemics. Italian third-party suppliers and manufacturers are in certain product categories. Often very specialized, forced to downgrade and expand the scope of service with different types of complementary products. For labels that require capital to recover, they have been acquired. It’s likely to happen, “he added.

In other words, the Italian luxury market is in a state of turmoil, given the number of transactions made by various Italian investment funds across national borders. It begins with Style Capital, which acquired a majority stake in Australian womenswear label Zimmermann in December 2020. at the same time, Exor, Agnelli family holding company acquires Chinese label Shanxia From Hermes. Automakers Stellantis and Ferrari, the economist of the media group and Exor, the controlling shareholder of Italy’s top football club Juventus, have also acquired a 24% stake in the iconic footwear label Christian. Louboutin Last March, we forked 541 million euros.

United front of Italian luxury brands?

Many observers are willing to bet that Exor will not stop there. Indeed, many see it as a potential luxury label aggregator-and so does Solca. “There are probably a lot of integrated deals in the Italian luxury market. Exor seems interested in playing this. [aggregator] “Role,” he told Renzo Rosso’s OTB Group is already a small fashion powerhouse and is often mentioned. LVMH and Kering Qatar investment fund Mayhoola, especially to owners ValentinoSoared to US group Michael Kors Versace In 2018, Italian luxury brands are willing to build a united front. The concept of integrating a different, ideally complementary Italian company into a new local entity seems no longer conceivable.

“The creation of a major new Italian luxury group still seems to me a distant future,” said Ghersini. “The problem is that the market remains very fragmented and specialized. Moreover, Italian operators always tend to think from an industrial perspective rather than a financial perspective. Therefore, this type of group Has never been founded in Italy, “he added, emphasizing the peculiarities of the Italian market. [companies] A family-owned company that is generally well-managed, but has two limitations: scope of expansion and inheritance. Therefore, the Italian market can offer a very interesting opportunity. Because local businesses certainly need capital and executive talent. “

Rumors are flooding around Giorgio Armani-SGP

It’s no coincidence that the most widely known groups behind the scenes of banks and financial companies are Giorgio Armani and Dolce & Gabbana. Both It is still owned by the founder and has no successor.Salvatore is also mentioned as a potential target Ferragamo, Another family-owned company, as it is Brunello Cucinelli, Listed company.

Other deals announced this summer

Last spring, Dolce & Gabbana denied the possibility of a connection with Kering, but said it could be part of a “wider Italian project.” Giorgio Armani acknowledged for the first time that his group could “consider relationships with major Italian companies”, not necessarily in the fashion sector. Without providing any further details, Couturier simply said, “French buyers weren’t on the card.”

Meanwhile, Italy’s luxury production sector has begun to restructure itself. In October 2020, investment funds VAM Investments, Fondo Italiano d’Investimento and Italmobiliare created the Florence Group and praised it as “a major manufacturing hub for Italian luxury apparel”. In the months, the new entity has acquired four well-established Italian producers: Giuntini SpA (((Outerwear and light fabrics), Ciemmeci Fashion Srl (leather and fur), Mely’s Maglieria Srl (knitwear), Manifatture Cesari (jersey specialist).

In 2020, the management of Onward Luxury Group, a former European luxury subsidiary of the Japan Group, acquired the assets of the dismantled company and High Italian, including five producers specializing in shoes, knitwear and leather goods. Manufacturing Co. I established a new organization called. And apparel, and some small fashion labels.

Elsewhere, with movements previously unthinkable in Italy, Prada Zegna Zegna has joined forces to build an unprecedented partnership, each acquiring a 40% stake in Filativia Geolimodest, an Italian producer specializing in cashmere. In a recent interview, Renzo Rosso said he was also keen on making several acquisitions among suppliers.

There may be more transactions in the Italian market between the supplier and the label, and there are some surprises in the coming weeks. There are rumors that a few acquisitions may be announced before the summer vacation.

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Transforming Italian luxury market

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