Luxury Brands - Store openings, Collaborations and Consolidation
Anjal Agrawal
M&A and Strategy at Virtusa || Ex-IB at Nomura (PPO) || IIM Shillong (17-19) || CA || Yes Bank FutureReady Scholar || Ex-JPM || Ex-Baker Tilly DHC || #ProudSINKWAD
The biggest groups, such as Louis Vuitton-owner LVMH and Gucci’s parent company Kering, have amassed sizable rosters of brands over the past several decades by way of various fashion and luxury-centric M&A transactions, thereby, enabling them to benefit from sheer size and scale, while making it more difficult for independently-owned brands to compete. The most financially solid players – such as LVMH, Kering or Chanel – will no doubt have the option of buying out competitors, subcontractors and even suppliers.
A growing number of M&A deals and funding rounds are bringing together some of the biggest names in the fashion and luxury space. The havoc wreaked on brands’ balance sheets by the COVID-19 pandemic and the resulting shift online (and the expenses that come with doing that and doing it well) is expected to accelerate that existing fashion industry M&A activity even further.
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Farfetch’s take-private after failed US float
In Nov-20, a $1.15bn deal brought together Cartier’s parent company Richemont, Chinese e-commerce titan Alibaba, and fashion retail platform Farfetch. The deal brought together three very big names in the fashion sphere with a focus on “providing luxury brands with enhanced access to the China market.”
Alibaba and Richemont backed Farfetch through a complex tie-up that saw the groups invest $300m in Farfetch, plus a further $250m each for a 25% stake in its Chinese offshoot. Farfetch was valued at $6.3bn when it initially went public in 2018, at $20. After touching a high of more than $73, Farfetch’s share price collapsed to just $1.71. In 2019, $2bn+ was wiped off its market value in a single day after it blindsided investors with a surprise $675m takeover of fashion label New Guards Group, owner of the licence for fashion label Off White, and reported larger-than-expected losses. Shareholders and analysts accused management of a dramatic shift in strategy from a low-risk, shop-front model to a company that owned brands, shops and stock.
In Nov-23, 3 years after the investments by Richemont and Alibaba, South Korean e-commerce giant Coupang, also called ‘Amazon of Asia,’ agreed to acquire Farfetch in a rescue deal providing it with $500m in emergency funding. At the time, Farfetch’s stock traded at less than $1. Its market cap had fallen to $254m, down from Feb-21’s $26bn peak. Potential synergies included –
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L Catterton to fulfil Tod’s privatisation dreams after 2 years
In Feb-24, L Catterton acquired 36% in Tod’s for €512m, at a 17.6% premium to the pre-bid price. Tod’s is an Italian fashion/leather goods brand.
In 2022, Tod's founding family tried to take the Milan-listed group private in an effort to revive its fortunes by managing its diverse brands separately but failed to reach the 90% ownership threshold needed and dropped the bid. Shareholders were then offered €40 per share.
L Catterton had agreed with Tod's majority shareholder, the Della Valle family, that delisting would give the firm "greater management and organisational flexibility, with faster decision-making" while cutting management and listing costs. In agreement with the Della Valles, L Catterton has offered to buy 36% of Tod's at €43 per share, a 17.6% premium to Friday's closing price, spending up to €512m. Under this deal, CEO and founder Diego Della Valle will tender his 10.45% stake in the company to L Catterton, while retaining 54% of the company together with his brother Andrea. LVMH will keep its 10% stake and L Catterton will own the remainder of Tod's if the tender offer is successful.
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Shein’s US IPO filing hits a roadblock
In Nov-23, Shein, the Chinese-Singaporean fast fashion retailer, filed for an IPO at the NY stock exchange, valued at $66bn with Goldman Sachs, JPMorgan Chase and Morgan Stanley mandated as lead underwriters for the IPO. The China-founded company has been working toward a NY IPO since at least 2020. But fraying Sino-American ties and volatile markets have forced it to push back those plans several times. Despite founder Chris Xu's efforts to distance the Singapore-headquartered firm from its Chinese roots and diversify supply chains, Shein's latest attempt at a New York debut has now hit several roadblocks. Lawmakers in Washington are demanding more disclosure on its business operations and China risks; Beijing regulators are also vetting the offering.
The retailer is eyeing London, Singapore, Hong Kong and other venues. These venues might allow the profitable firm's backers to cash out faster. But if Shein is to hit its mooted $90bn valuation target, New York still outshines the rest. Switching to London or another destination in Europe, where rivals like Sweden's H&M and Zara-owner Inditex are also listed, has some logic. The region is also one of Shein's largest markets. Asia's financial hubs will no doubt roll out the red carpet for Shein. Singapore boasts the region's most international major bourse with about 40% of listed firms coming from elsewhere while Hong Kong, despite the selloff in Chinese equities, is among Asia's biggest fundraising destinations. Both have not had multi-billion-dollar listings in years.
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Other Recent Transactions
Mar-24: Miroglio acquired Trussardi for ~$40m – Trussardi is a more than 100-year-old Italian luxury brand specializing in the manufacture and distribution of apparel. A year ago, Trussardi sought protection from a Milan court to shield it from creditors while it restructured and cut costs. The deal will enable Trussardi to remain an independent brand and enable Miroglio to expand into menswear and leather goods.
Feb-24: The Very Group raised ￡125m – The Barclay family-owned retail group, which owns/operates Littlewoods.com and Very.co.uk, as well as Very Financial Services, will use the new funds to “support its growth strategy,” with Carlyle putting in ￡85m and IMI investing the remaining ￡40m.
Feb-24: NTWRK acquired Complex from BuzzFeed for $108m – Complex is a music, culture, and streetwear digital media site, that will support its e-commerce business and create a new destination for ‘superfan’ culture that will define the future of commerce, digital media, and music.
Feb-24: Guess acquired Rag & Bone for $56.5m – Rag & Bone is a brand well known for its pre-eminence in American fashion that over the years has stayed true to its roots and founding values, with an unwavering commitment to quality and authenticity. This acquisition is the first one in the 43-year history of Guess.
Dec-23: Frasers Group acquired Matches for ￡52m – Luxury clothing retailer Matches Fashion has been loss-making in recent years, reporting a loss of ￡33.5m. The deal is expected to enable Frasers to further develop its “elevation strategy” to take the group – which currently consists of brands like Sports Direct, House of Fraser, Gieves & Hawks, Jack Wills, and Missguided, among other names – to move more upmarket.
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This article is an introduction to my upcoming series “Luxury Consolidations – Survival of the Omnipotent and the Omnipresent” comprising 2 case studies on acquisitions by the biggest luxury brands in the world – LVMH <> Tiffany and Tapestry <> Capri Holdings. The industry titans have amassed sizable rosters of brands over the past several decades by way of various fashion and luxury-centric M&A transactions, thereby, enabling them to benefit from sheer size and scale, while making it more difficult for independently-owned brands to compete.
In the next case study, we study Louis Vuitton’s acquisition of Tiffany & Co. after the consortium managed to put their rival lawsuits to bed?and come to agreeable terms under which the famed New York-based jewellery stalwart could be brought under the ownership umbrella of the Paris-based luxury goods titan.?Until then, thank you for your time. Please post your feedback and comments.
Please find below all the information sources that have been instrumental to the above article, along with some additional reading materials. Gratitude to all the creators –
1.????? https://www.thefashionlaw.com/a-running-timeline-of-fashion-and-luxury-mergers-acquisitions/
3.????? https://www.voguebusiness.com/story/companies/why-farfetch-was-acquired-by-the-amazon-of-asia
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