The Biggest Fashion Acquisition And Deal Of The Decade: The Establishment Of Luxury Empire

When LVMH bought Bulgari for $5.2 billion in 2011, Bernard Arnault, chairman and chief executive of the group, had already established a super brand portfolio, including Louis Vuitton, Givenchy and Sephora. Over the next nine years, Arnault created a new brand matrix by acquiring rimowa, a German luggage company, establishing a joint venture with Stella McCartney, launching Fenty with Rihanna, and integrating Christian Dior for $13 billion in 2017. LVMH has become the second largest company in Europe with a market value of US $200 million. So it's fitting to end the decade with another blockbuster LVMH acquisition: just a month ago, the group bought Tiffany & Co., an American jeweler, for $16.2 billion.
But as younger, more global consumers emerge, the industry has to respond, leading many companies to rebuild their luxury brand matrix. In the past decade, the luxury market has become more global, brand product prices began to adopt global pricing strategy, and the supply chain has extended to all parts of the world. After dinner, the brand of tea in the market is directly influenced by consumers. The acquisition rate of Bain's luxury goods companies in the next decade also accounts for about 19% of the total sales of luxury goods companies in China, which shows that the sales volume of some luxury goods companies in China in the next decade is significantly higher than that in the next decade. The rapid change of consumption habits, the rise of experiential shopping and the shrinking of traditional sales channels driven by e-commerce all mean that "big" has become a necessary condition in the global competitive environment.
Although there were some big deals before 2010 (such as LVMH's $2.47 billion acquisition of DFS in 1997), the number of acquisitions increased significantly after 2011. The acquisition price of Tiffany will set off a wave of large-scale acquisitions with MH in the next 10 years. There is no doubt that LVMH has warned its competitors.
Valentino spring / summer 2019 fashion show image source: Getty Images
1. Mayhoola acquired Valentino (2012)
The mayhoola family private equity foundation, a foundation backed by the royal family of Qatar, bought the Italian fashion company from permira, a private equity firm, for $850 million in 2012. Valentino was founded by designer Valentino garavani in 1960 and flourished under the leadership of mayhoola. Over the past few years, the group has also acquired a number of luxury brands, including Balmain and men's wear brand pal Zileri.
In 2018, with rumors that mayhoola might sell Valentino, kering became the subject of speculation about buying the brand (all parties declined to comment at the time). Valentino is likely to get a sizable price, but the success of the deal will depend on whether its creative director Pierpaolo piccioli remains in the brand, after all, piccioli's show performance is a favorite of critics.
2. Yoox merged with net-a-porter (2015), and Richemont group subsequently acquired the merged company (2018)
In September 2015, net-a-porter, a London based fashion e-commerce company, merged with Yoox, a discount fashion e-commerce company based in Italy. Six months later, Natalie Massenet, the founder of the former, suddenly left. Richemont, the Swiss luxury group, bought net-a-porter after it invested in it.
One month later, ynap was officially listed in Borsa Italiana, becoming the world's largest fashion e-commerce retailer with a total market value of more than 3.7 billion US dollars and an annual revenue of more than 1.3 billion US dollars, controlling more than 10% of the global online fashion and luxury market.
But now, ynap is facing competition from competitors such as farfetch and matchsfashion, the rise of resale platforms such as vestiare collective and the real real, and the improvement of e-commerce operations by luxury brands themselves have brought pressure on it. This year, the company has also had a series of senior executives leaving the company.
In May 2019, Lifeng group released the performance report of the previous fiscal year, exposing the problem of ynap. In the fiscal year ending March 2019, the division, including e-commerce platforms, achieved double-digit growth, while operating losses of $264 million were recorded, including a $165 million write down of the ynap acquisition value. BOF analyzes the root causes of the losses, and there is evidence that technology upgrades intended to help companies defend against potential risks are counterproductive. By 2020, ynap will not be able to achieve the sales target of US $4 billion, and it will continue to drag down the development of Lifeng group while its competitors are gradually expanding.
Acquisition of majority stake in apsfast. 3
The acquisition of a majority of the New York based private equity platform, apshion, was valued at more than $1 billion in 2017. The move comes after the UK based multi brand e-retailer sparked a fierce bidding war. Bain Capital, KKR and permira are said to have shown interest.
Tom Chapman and Ruth Chapman opened a boutique in Wimbledon in 1987, and then expanded rapidly with their unique vision. Although the luxury e-commerce market is developing rapidly, it still faces challenges. In November 2019, the multi brand online retailer reported a 27% increase in sales for the year to 31 January, to 372 million pounds. But growth was slower than last year's 44% and operating profit fell 89% to 2.4m. Ulric Jerome, chief executive of matchsfashion, also abruptly left in August.
Supreme x Louis Vuitton co branded series | image source: brand
4. Carlyle invested Supreme (2017)
This is the first time Carlyle, a top private equity firm, has invested in the streetwear brand, and the deal highlights the influence of the street brand. Carlyle bought about 50% of supreme for about $500 million, which put the company's valuation at more than $1 billion, the company's sources confirmed. However, it remains to be seen whether supreme can turn its influence into a valuable commodity and continue to expand its brand size. Carlyle doesn't plan to hold the business for a long time. Instead, it will hope to rely on the brand's significantly increased sales and then retreat.
Acquired in 2017 (5. Spade coach)
Coach bought Kate Spade for $2.4 billion in 2017, but this is only part of the expansion plan of the US luxury group. The group hopes to follow the route of Kaiyun group or LVMH (the Group acquired Stuart Weitzman two years ago) and appear in public view under the new name tapestry Inc. The group plans to combine coach, Kate Spade and Stuart Weitzman to combat the loss of shopping mall traffic and the increasingly fierce online competition.
But in September 2019, a few weeks after the company lowered its full year earnings forecast, tapestry removed Victor Luis, its chief executive, because the acquisition did not succeed as expected. According to BOF's report and analysis, the main problem is Kate Spade. The colorful handbags of the brand once swept a generation of young women in the United States, but gradually lost its influence. Tapestry has been trying to turn this around, but the new product of Nicola glass, Kate Spade's creative director, who started at the end of 2017, is still not receiving much attention. This brand lacks the narrative power and cultural significance of the old European luxury brands, and has no direct connection with its designers. Tapestry chairman Jide Zeitlin, who took over Luis after his departure, has begun to lead the search for a new replacement. It's a tough task: to compete with the luxury giants of Europe, brands have to adopt a patient and long-term mindset.
6. Michael kors holdings acquired Versace to establish Capri Holdings (2018)
Michael kors Holdings has also been involved in the competition to build a luxury group in the United States. Now the company is renamed Capri holdings, and in September 2018, it purchased Versace, a famous Italian fashion brand, for us $2.1 billion. The group wants to help it take a larger share of the high-end luxury market.
Jennifer Lopez at Versace spring / summer 2020 fashion show
In 2011, Michael kors holdings A shares were IPO, when the company was valued at $3.63 billion. Versace is respected and respected, but its global reach is far greater. But for a company with a long history that has struggled to achieve sales growth and often loses money, Michael kors holdings's purchase price for Versace is too high.
Earlier this year, Capri CEO John idol told BOF that he expected the Italian brand's sales to more than double to $2 billion in the next few years, thanks to its popularity and the group's investment. Versace plans to increase the number of stores to 300 and expand its line of handbags and women's wear to drive sales. Versace's year-on-year sales in the third quarter were flat compared with the same period last year, but there is still a chance of doubling sales if it continues to take advantage of the nostalgia spread by Donatella Versace.
7. Farfetch IPO (2018)
Farfetch is one of the largest online luxury retail companies in the world, but it regards itself as a technology company, promising investors that it will use its customer data and advanced online platform to transform it into profits, without the need for offline stores, warehouses and other physical assets that depress retail profit margins.
Unlike department stores such as Fifth Avenue and Barneys New York, as well as online competitors such as net-a-porter and matchsfashion, farfetch does not take the risk of purchase and inventory and allows brands and retailers to sell directly, with an average commission of 30% for each sale.
Farfetch public offering is one of the largest fashion IPOs in history | image source: shutterstock
For sellers, access to farfetch's growing global customer base. The company's IPO is one of the largest fashion IPOs in many years, with a valuation of $5.8 billion, which brings fashion into the vision of Silicon Valley. But now farfetch faces the same challenge as Uber: improving profitability.
In August, farfetch acquired new guards group, the parent company of off white, a street clothing brand. But it is difficult for the company to explain whether the acquisition is in line with its strategy of becoming an Amazon style luxury platform. From IPO to now, investors have been disappointed by the company's changing business model, over active M & A transactions and disappointing profit performance.
8. Fosun Group's acquisition of majority stake in Lanvin (2018)
After 17 years in charge of Lanvin by Taiwan media queen Wang Xiaolan, the brand was rescued from the brink of collapse by a Chinese company. Lanvin made $235 million in revenue under the leadership of then designer Alber elbaz, peaking in 2012, but four years later, the company reported its first loss in more than a decade, with revenue plummeting. The change of creative director in the next two years failed to calm the storm.
The deal is Fosun's most watched fashion investment so far. Over the past five years, Chinese investors have grown interested in traditional European brands, such as the acquisition of bankrupt carven by Shanghai Zhihe group. But as BOF reported earlier this year, not every deal is profitable, and Lanvin still has a lot of work to do.
9. Authentic brands group acquired Barnes department store (2019)
After three months of bankruptcy, Barnes g bought the brand of luxury goods for $71.4 billion. The deal will close most of its stores and give it to its North American rival, Saks Fifth Avenue, to take over.
Barnes was forced to file for bankruptcy protection in August after annual rents for its Madison Avenue store rose 72% to $27.9 million. This is the result of an arbitration award after the store and its landlord Ben Ashkenazy failed to negotiate the terms of the new lease.
Backed by private equity firm black rock, ABG has built a lucrative business by granting intellectual property rights to a large number of suppliers and manufacturers, from shoes to cream. There is no inventory build-up, and ABG's profits come from the royalties of its partners. As part of Barney's plan to monetize intellectual property rights, ABG is building new flash stores, in store stores and e-commerce platforms to transform Barnes Madison Avenue into a retail experience for flash stores, including art installations, boutiques and entertainment facilities.
10. LVMH acquired Tiffany for $16.2 billion (2019)
This is the largest acquisition in the history of the luxury industry, and Tiffany is part of the world's largest luxury group. The group's last investment in the luxury jewelry brand goes back to 2011, when it bought Bulgari for $5.2 billion, doubling its watch and jewelry business.
Jean Jacques guiony, LVMH's chief financial officer, said the Tiffany deal would make the group a "rule of the game revolutionist" in the wristwatch and jewelry business and dispelled concerns about Tiffany's recent decline. The U.S. jeweller had been faced with weak external demand and needed a lot of money to revive its brand and business. The deal will use LVMH's huge influence in the market to support Tiffany's transformation. Tiffany has been trying to reform its retail network. Poor sales planning and unbalanced in store experience have weakened its strong brand competitiveness. At the same time, the acquisition will also enhance LVMH's appeal in the US market. For the moment, it's a hard news deal for Valentin & vailes, which is the main competitor of the deal. Jewelry was one of the best performing luxury categories in 2018, according to Bain consulting, which predicts that the global $20 billion jewelry watch market will grow by 7% this year.