Luxury Industry Mergers And Acquisitions Big Appetite

Mergers and acquisitions in the luxury sector often seem to be appetites in the summer, but most of Europe is closed in the summer. Executives want to trade when no one is paying attention.

According to the world clothing and shoe net, this summer is no exception: buying 30% stake in Stone Island from Temasek in Singapore, and acquiring 30% stake in Giambattista Valli by Groupe Art e MIS of Swiss financial and industrial group, and acquiring Kors Jimmy and Cox group ($1 billion 200 million) for 2 billion 400 million dollars by Michael Kors.

Although sometimes the mode of "enterprise group" is sometimes criticized for inefficient production, it is still in the process of being inefficient.

In the field, M & A is very common.

Us fashion tycoons Coach and Michael Kors hope to open up a new model beyond the traditional "three big" luxury giants, LVMH, LVMH and Richemont.

But this summer, there is another news that does not seem to take the summer M & a cycle into account: the group announced that it would eventually release the Shanghai Tang, a poor brand in Shanghai, to Italy entrepreneur Alessandro Bastagli.

People often hear about what large luxury groups should buy.

But few people are serious about which brands they should sell.

LVMH said it agreed to sell Donna Karan International in July last year, because it is difficult to reject the offer of $650 million from the buyer's G-III group, which is more proactive and more opportunistic than the Donna Karan brand in 2000.

The acquisition of $450 million has not flourished so far.

It should be said that the brand has dispersed the attention of the group and sold it a few years ago.

Investors have been urging the brand to break away from fashion and leather products, mainly because of the poor performance of Lancel (with market sources indicating that the Swiss group has been trying to sell the brand over the years) instead of truly focusing on hard luxury.

Fashion houses like Ala, a and Chlo may be more suitable for LVMH or Kai Yun.

And the cloud has been rumored for many years that it will sell the small brands of sportswear giant Puma (Puma) and the luxury business of some of its dispersed groups, including its Volcom lifestyle group.

"But Puma is different. Opening the cloud to its acquisition should mark the group's entry into the lifestyle market and go out of a new way of development, supplemented by other luxury brands of the group." in December 2016, Luca Solca, head of the luxury sector of the BNP Exane Paribas of Paris securities bank, wrote, "why sports brand Puma is the key to the future of luxury group Kering?"

LVMH, the opening of cloud and the peak, and the new competitors, cunchi group, Michael Kors and Mayhoola (owns the Valentino Fashion Group group, Anya Hindmarch, Balmain's important stake in Qatar Royal Investment Funds), must strive to maintain the brand spectrum optimization.

This means selling poorly performing brands and buying new brands.

"Poor brands are the source of distractions and distractions for the funding side and the executive level," Solca said. "It is never too early to rationalize your portfolio, especially in the next 3 to 5 years of growth."

According to Bain Consultancy (Bain&Company), global sales of personal luxury goods are expected to grow by 3% to 4% every year before 2020, reaching 280 billion to 290 billion euros.

But this is not simple.

As family businesses, these big groups already have the advantage of buying long-term potential brands, even if the performance is not balanced in the short term.

Kai Yun group bought a leather brand Bottega Veneta in 2001 to win a battle: revive the brand with the annual sales volume of only $40 million, and finally achieve about $1 billion 400 million annual sales in 2016. In addition, although Saint Laurent needs more time to get on the right track, it has been a record high since its resignation as creative director Hedi Slimane.

But the weakness is not.

"These are family businesses, and different families are doing business. Sometimes family businesses are not necessarily rational," said the author of the four major innovation strategies (Independent Luxury:The Four Innovation Strategies To Endure in the Consolidation the), an associate professor of SKEMA business school in Paris and an independent luxury: "we must comply with the merger and acquisition jungle."

In the long run, yes, LVMH has his reason to sell Marc Jacobs, but there are also examples of Christian Lacroix, one of the brands that Bernard Arnault personally created, and they haven't sold them for 20 consecutive years.

"In some cases, the group is still determining the location of the brand's life cycle," said Bain consulting partner Vandana Radhakrishnan.

Although Bernard Arnault, chairman and chief executive of LVMH, acquired C line in 1988, it did not merge into the group until 1996.

Since then, in 1997, the group appointed Michael Kors as the creative director of C e line and lasted until 2004, and finally exceeded 20 years.

"C e line was bought at a high valuation, and there has been no growth since then, but LVMH's intuition is very keen." it will continue to keep the brand and wait until the creative talents to bring the brand potential into full play, which is "the lifeline of the brand's real needs". Radhakrishnan talked about the Phoebe Philo vision of the brand later hired.

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For the broader spectrum of brand spectrum LMVH (group includes wine, spirits or even Italy dessert shop Cova and France financial news Les Echos, etc. across many fields, a total of more than 70 companies), there is almost no need to rush to be successful all the time, with higher vitality and bottom line to wait for the next irresistible offer - just like Donna Karan International.

"LVMH, there is a possibility of hedging," Hoffmann said. "If one of them is not performing well, you will bet against many parties to hedge."

For example, LVMH will continue to hold such a poor brand as Edun, because the core value of the brand, sustainable and social responsibility, can better reflect the values of the next generation of luxury consumers.

But in 2016, LVMH did sell most of its stake in Nude, the brand co founded by Edun, one of the founders of the brand, to Beautycounter, the main Beautycounter company, which was "pure and well protected". The amount of the paction was not disclosed.

But under LVMH, there are still some poorly performing companies that can become candidates for divestment.

For example, the brand Thomas Pink, once favored by investment bankers, paid about $50 million in 1999 to buy its 70% stake in LVMH.

Under the management of LVMH, the shirt manufacturer has upgraded from the main market in the UK to international players, and has opened over 100 stores worldwide.

But because the office is beginning to wear away from traditional shirts and suits, the brand failed to evolve into consumers' interest in time.

In the UK, brand sales in 2015 dropped 6% from 35 million in the same period last year, to 35 million pounds. The brand believes that the main reason for the decrease in discount and overseas business is.

Although Thomas Pink's business has grown globally since the acquisition (LVMH did not disclose brand sales), sales of branded products in the UK have barely increased in the past 20 years (in 1998, the brand's annual sales volume had reached 25 million pounds).

In addition, the brand has never won a reputation as the French shirt maker Charvet and other competitors - C e line designer Phoebe Philo and film director Sofia Coppola (Sofia Coppola) love Charvet's long sleeved shirt and slippers.

Another brand that LVMH may sell is Marc Jacobs, which has lost half of its value since it reached the peak of retail sales of over $1 billion in 2014.

But LVMH is unlikely to give up the brand in a short time.

Whether Marc Jacobs will eventually turn smoothly is still unknown, but the chairman of Arnault is still loyal to the designer. Jacobs helped to push the brand to a peak of several US $1 billion during the period of being the Louis Vuitton of the same group as its brand designer, which means LVMH will continue to work hard to promote Marc Jacobs in the short term.

Whether the designer Marc Jacobs himself or his brand, the group has strong emotional commitment.

To be sure, it is equally important to optimize the brand portfolio and acquire the same old brand at the same time. The latter is a longer and more difficult process.

"Several luxury conglomerates took a long time before deciding to pull out the plug for these poorly performing brands," Solca said. "But after 10 years of hard work, the brand of gold is really rare.

10 years should be regarded as a time limit, acknowledges that you are unable to successfully acquire the acquired brand successfully.

The best takeover should be a careful plan since the first day of acquisition, which is a sign of successful operation in the next 3 years.

"My experience is that entrepreneurs in this industry do not like to sell their brands," he added. "Entrepreneurs are also builders.

To sell a brand is to admit the failure of its own construction project.

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