Chinese Capital Opens Up Overseas Mergers And Acquisitions For Luxury Brands

Yang Mi, the king of goods, may not have thought of her hot luxury French brand.

The controlling shareholder is actually a private enterprise in Shandong, China.

In addition to Sandro, France is equally popular.

Maje, also known as "Ruyi" Shandong textile enterprises.

Its latest move was to acquire Swiss luxury in February this year.

Brand Bally, market rumors, the price of Bally is about $700 million.

In fact, Ruyi group is only one of the Chinese fishing boats.

Shortly after the Bally incident, Fosun international bought a high-profile fashion brand Lanvin from France.

Chinese consumers have long been known about the "buy and sell" of luxury goods. Nowadays, Chinese capital is also bold and courageous in buying and buying luxury brands.

1, go to sea.

According to the world clothing and shoe net, when the parent company JAB formally announced the launch of the Bally program in August last year, there was no Ruyi in Shandong's initial bidding list.

However, Chinese capital was not idle, and all of the Fosun international, seven wolves and Herme groups appeared.

The strong momentum and determination of Chinese private enterprises to compete overseas for luxury brands are evident in the acquisition of Bally.

The entry is not new.

Fosun Group was invested in Folli Follie of Greece Jewelry Group in 2011. In 2013, it was invested in the US high-end knitting brand St John Knits and Italy luxury men's wear Caruso; in 2014, the German fashion brand Tom Tailor 23% was acquired.

In 2018, in addition to the acquisition of Lanvin, Fosun's company also won the high-end underwear brand Wolford of Austria.

Guo Guangchang, chairman of the board, once said on CCTV program that the group was intent on acquiring Prada and Moncler.

It seems to be an attempt to highlight the determination of the overseas luxury industry. Fuxing set up a fashion group recently to manage Fosun related assets and find opportunities to invest in all kinds of global brands.

HM, the Chinese enterprise based on instrumentation R & D and manufacturing, began to enter the fashion industry in 2016 after buying every gram of Latin American jewelry in 2013.

In July last year, they acquired 100% of Shanghai's Euro Blue stake in the authorized retail business of the global luxury brand clothing. In August, they bought 560 million of Wenzhou's lofty department's 100% stake in Armani, Hogan and Dolce&Gabbana and other luxury brand agents. In October, 800 million of the 80% subsidiaries of the Rainbow Group's four subsidiaries were awarded 800 million international cash and management rights including Armani, MCM, ESCADA, Versus and Versace.

In April, hundreds of stores were sold and dozens of international brands were sold.

Seven wolves, although the two or three tier cities in China are often adjacent to salted chicken shops, but the overseas road is abnormal.

In August last year, the "wolf" succeeded in "Lord Buddha" and invested RMB 320 million yuan to obtain the trademark right to use Karl Lagerfeld (commonly known as "Buddha") in Greater China.

Karl Lagerfeld himself is regarded as a master figure in the global fashion industry.

Although the marriage between Chinese aborigines and European aristocrats has caused fashion people to howl, the seven wolves who never miss the Milan fashion week undoubtedly show their ambition again in the way of integrating with international fashion.

The final entry of Shandong Ruyi, formerly known as the Jining wool textile factory, was founded in 1972.

As early as 2010, Ruyi began to buy overseas, and the first battle became the largest shareholder of RENOWN, a Japanese clothing giant. Six years later, Ruyi once again worked hard to spend 1 billion 300 million euros to acquire 70% stake in France fashion group SMCP, which owns Sandro, Maje and Claudie Pierlot.

Although Sandro and Maje were hot in social networking due to the popularity of Yang Mi and other stars, Ruyi group still had a lot of blame for the SMCP valued at $1 billion, because its holding price is at least 120% premium based on fair value.

In March last year, Ruyi went to the next city to buy the 100 year luxury brand Aquascutum of the United Kingdom at the price of 117 million US dollars. In November, it was 2 billion 200 million Hong Kong dollar holding Hongkong high-end men's wear Group Li bang. In the same month, it also became the largest shareholder of the Baqer group of the innovative garment design manufacturer at the price of 16 million 500 thousand US dollars.

And Ruyi does not hide this trend, its official website says: "in the past ten years, the focus will be shifted to global resource allocation."

Ruyi Group official website

Qiu Yafu, NPC deputy and deputy director of the National People's Congress (NPC), recently revealed at the national two sessions that the group now has more than 30 international brands and 5000 brand stores covering 110 countries and regions, and jokes that China's fashion capital will probably appear in Shandong, the hometown of Confucius and Mencius in the future.

Another sea warrior must be mentioned. It is Shenzhen's song.

The brand known local clothing business has bought the German dress brand Laur L, the American light luxury brand Ed Hardy, the French designer leisure brand IRO since 2015, and won the Chinese American brand VIVIENNE TAM operation right at the price of 37 million yuan last year.

Needless to say, the pride and courage of the Chinese competitors who are quietly rising in the luxury market dominated by European enterprises, like the Chinese mothers who dance square dance in front of Le Louvre Museum, have a double blow to the eyes and heart of the nobility.

2 Crazy buying one trillion

McKinsey's 2017 China luxury report said that the main force of China's consumer spending has been a big hit on global luxury goods, attracting much attention from the industry.

Looking at the world, Chinese consumers account for more than 3 of the largest luxury consumer groups.

In 2017, China's luxury goods sales amounted to RMB 142 billion yuan, an increase of about 20% compared with 2016, the biggest increase since 2011.

The report predicts that Chinese consumers will remain one of the biggest engines of global luxury market growth. In 2025, the Chinese affluent will buy 44% of the world's luxury goods market, that is, the contribution of 1 trillion yuan.

{page_break}

McKinsey's 2017 China luxury Report

Bain's 2017 China luxury market research pointed out that the government's further promotion of encouraging domestic consumption, strengthening purchasing and purchasing control, and adjusting the price difference between domestic and foreign markets by the top luxury brands are the main reasons for the rebound in the mainland's luxury market.

Looking at European LVMH and other famous luxury goods and fashion groups, it is all through continuous M & A to achieve growth.

Huge profits and capital cycle are the core drivers of luxury group.

Gucci, the parent company of luxury brand, broke 15 billion euros in its fiscal year 2017, and its net profit increased by 120% to 1 billion 780 million euros.

The envy of profits and net interest rates is an important reason why Chinese enterprises are in a rush. To occupy a place in it is a good deal, no matter from the point of view of management or investment.

What's more, the influence of big international brands has long squeezed the survival space of domestic brands taking the consumer route.

At the just concluded two sessions, Qiu Yat Fu said in a speech at the Shandong delegation: "the shirts produced in China only sell 110 yuan, while foreign brands sell to 8000 yuan; the domestic suits are 500 yuan out, and foreign suits can be sold to 50 thousand, which is the brand gap."

Therefore, Ruyi group has shifted its focus to global resource allocation in the past 10 years.

This wishful thinking is very clear, and it is necessary to develop and develop China's own brand on the basis of the acquisition of international brands, so as to integrate the fashionable resources.

Qiu Yafu's manifesto is very high-profile, he said: "overseas acquisitions, is to let big cards for all I use."

3 the Savior, or the knight?

Good policy is also one of the important factors of overseas enterprises.

Although China's foreign investment was strongly regulated in 2017, overseas acquisitions in the consumer sector had not been much affected as the driving force of China's economic growth shifted from investment to consumption.

Moreover, there is a policy of belt tightening.

In August last year, a spokesman for the Ministry of Commerce made it clear that the Ministry of Commerce would further promote the reform of the management system and mechanism of overseas investment and strive to achieve "Three Guarantees".

One of them is to ensure the smooth development of the "one belt and one road" construction.

The main battleground of luxury acquisition is in the European Section of "one belt and one road".

According to Thomson Reuters's 2017 China merger and acquisition report, although the number of overseas M & A pactions in China has dropped by 37% this year, the amount of M & A pactions along the "along the way" area has reached a record high of 46 billion 100 million US dollars, which has exceeded the total 30 billion 500 million US dollars in 2016.

For some overseas luxury brands, the road of development has not been smooth in the past few years.

In particular, European brands, the debt crisis has led to the deterioration of the macroeconomic situation, the double reduction of consumer willingness and ability, and the digitalization of e-commerce has brought a certain degree of impact, so that its surface scenery has been difficult.

For example, Lanvin has been on the decline since 2012, and its sales plunged further in 2016, the first loss of the company in ten years. Karl Lagerfeld's brand publicity in China is not thorough, and the promotion of products is not enough.

Therefore, it is not necessarily a bad choice to accept the Chinese stake or sell the shareholding power, and further expand and deepen the Chinese market under the support of Chinese enterprises.

The other situation is different.

For example, SMCP can be listed before it is accepted.

Ruyi's stake is more likely to bring greater potential for China's market development with the status of China's gold master.

In the first half of 2017, the sales volume of SMCP, Sandro, Maje and Claudie Pierlot in the Asia Pacific region increased by 51%.

In October 2017, SMCP was listed on the pan European stock exchange in Paris, France, with a market value of nearly 12 billion yuan.

Similarly, for the Bally that nearly half of the world's goods are bought by Chinese consumers each year, the present paction will make it more likely to develop in the future.

"To marry" to the "wolf Buddha" of the seven wolves, I also realized that the potential of Chinese consumer groups is huge. In recent years, they have attached great importance to the development in China.

For big foreign brands, it is no doubt an important starting point to try to expand the consumer groups in the Chinese market and have experienced and reputable local businesses.

Guo Guangchang said in an interview: "the brand is more focused on the international layout of Fosun and China's rich resources and landing capability.

The development of foreign brands in China and Asia, Fosun can provide a lot of synergy and help.

4 roads lead to the same goal.

It is not difficult to find out the overseas bidding of Chinese asset holders who are bidding for Bally. Although they are all buying and selling, they are quite different.

From the point of view of acquisition, a representative brand is represented by Ruyi and seven wolves, and the brand is acquired directly by strategic stake or wholly owned form. The other is represented by Herme as a representative of the layout of channel resources.

The two have their advantages and disadvantages.

The former can enhance the international reputation of China's capital, but the management after acquisition is not difficult, and its control over dealer channels is relatively weak. The latter, starting from the channel, has low cost and light assets, and appears to be more pragmatic. However, it has little binding force on the brand side. Once the brand side's strategy fails, the risk and pressure will increase.

There are two different directions in the first mode.

One such as Shandong is willing to follow the vertical development path of the upstream and downstream industries.

Over the years, the industry of the textile industry has been developing upstream, and the two sectors are the wool textile industry and the garment industry. It has a whole industrial chain from raw materials, yarns, dyeing, fabrics, weaving, sewing and so on.

Ruyi is a typical representative made in China, and is the only traditional textile enterprise in the world with sales volume of over 10 billion yuan.

Under the background of consumption upgrading, upstream enterprises are facing the pressure of market downturn and overcapacity, and the pformation from suppliers to luxury brands can be seen as a road of pformation that will expand the new growth point.

One, like the seven wolves, chose parallel expansion strategy.

It has already formed a mature menswear brand in China, and has gone overseas to buy Women's clothing brand or other product lines as the supplement or upgrade of the original brand.

Of course, there are also professional investment institutions such as Fosun.

In addition to its own investment, Fosun is also being visited by more and more Chinese clothing companies to undertake overseas acquisitions.

Fosun also admitted that its capital operation capability and overseas M & A experience are just what most traditional industry companies need.

5 a misty future

Can it be called a frenzied overseas M & A, a kind of irrational madness? Or is it the only way for Chinese brands to go out of the way of saving the country with curves? Obviously, the Chinese enterprises behind the big names have not given a clear answer.

It is the best path for China's garment industry to catch up with the international level through the use of international fashion resources through capital strength.

If you want to know how to make fashion brand, you must find the source of fashion, so Ruyi has made a series of mergers and acquisitions in France, Italy, Britain and Japan.

Qiu Yafu described the logic of frequent mergers and acquisitions.

However, it is obvious that many domestic brands have been questioned by the frequent acquisition of European luxury brands.

What are the benefits of Chinese luxury goods that are hidden behind the income pack of Chinese enterprises? The two dimensions are the yardstick for judging whether the acquisition is successful.

Taking Ruyi group as an example, SMCP succeeded in landing on the pan European stock exchange in Paris in October 20, 2017, and its valuation exceeded 2 billion euros.

In DDT released the list of the top 100 luxury goods in 2017, SMCP and Renown of Ruyi holdings ranked 51 and 58 respectively.

But even so, there is still a gap between the valuation of Ruyi group and the acquisition.

According to the data disclosed, the valuation of the Ruyi group has been over 14 billion RMB yuan when it acquired SMCP.

It is worth mentioning that the acquisition of SMCP equity price is equivalent to 200 times the net profit of Ruyi group in the past year.

The current market value of Ruyi group is still less than 5 billion yuan.

Compared with Ruyi group, wig Nash, a 5 billion 700 million Teenie Weenie, has even worried that Vigna S's own market value is only 3 billion 800 million yuan.

After the listing, its net profit has been declining all the way, and it is hard to say that it is optimistic in the short term.

According to Reuters, the acquisition was a huge investment for Vigna S, which paid a high premium for Teenie Weenie.

Data show that these listed companies from domestic A shares, mostly through borrowing, lending or additional funds raised by means of mergers and acquisitions.

The way of merger and acquisition in or out of foreign loans has attracted the attention of the people in the industry.

To a certain extent, it is undoubtedly a kind of bleeding behavior for the capital market.

On the other hand, the grandiose territory that the M & A hopes can not be pformed into a return to local shareholders in the short term.

Moreover, under the background of consumption upgrading and new retail, there is still a huge capital gap for the subsequent integration and landing of M & A brands.

In the acquisition of international brands by Chinese enterprises, there is Geely's acquisition of Volvo as a textbook case, and Lenovo's failure to merge Motorola mobile phone business.

At least in the field of luxury brands, there is no successful case for reference.

At the same time, the integration, digestion and follow-up management of new brands is a pressing matter for Chinese buyers.

Analysts in the industry believe that Chinese local buyers still lack a certain degree of control over brand culture and post investment management. They also have a wait-and-see attitude towards the future prospects of mergers and acquisitions.

Objectively speaking, China's manufacturing has long been criticized as "low end", and even local consumers sometimes have some complaints about it.

So when those western style brands in Europa become Chinese capital followers, will they be willing to be fans like before? These are questions that China's capital buyers need to think deeply about.

More interesting reports, please pay attention to the world clothing shoes and hats net.