The fashion luxury market is reaching its highest growth so far. Statistics show that the whole segment is worth $106.85 billion and is expected to increase annually by 4.81% in CAGR from 2021 to 2025 (Statista, 2021). The main high-end fashion conglomerates are the French with LVMH, Kering and Hermes, the Italians with Moncler and Exor Holding and last but not least, the Swiss with Richemont. These companies find themselves in a competitive ecosystem in which they need to learn how to be innovative enough in order to stay in the market and differentiate themselves.

As the coronavirus pandemic severely hit many industries in the consumer goods sector, hence, the fashion sector has deeply suffered the consequences of it. Almost three quarters of the listed companies reported losses and faced the worst year on record. This is mainly due to rapid consumer behavior changes such as new buying options, interruption of supply chains, and strict government restrictions (Vogue Business, 2021). What is more, as individuals’ retail demands shifted towards online shopping and social media platforms, these impacted strategies adopted by companies and changes are now immediate. Hence, as McKinsey (2021, p. 11) stated in their “The State of Fashion 2021” report, this crisis will accelerate trends which were already existing in 2019, such as shopping shifts and consumer preferences towards sustainability themes.

For the purpose of survival, a great number of companies fell into the arms of the high-end conglomerates. The year 2020 flourished with M&A deals, and 2021 is expected to follow the same line of conduct. The reason for this circumstance is that nowadays borrowing costs are facing their lowest points, thus, circumstances for proceeding with M&A deals are favorable. Furthermore, Deloitte (2021) in their report on “Global Fashion and Luxury Private Equity”, dictated the three main trends of M&A in 2021: big maisons looking for an opportunity to consolidate, high-end brands exploring vertical integration by investing in disrupted areas of their supply chain and investments in digital and APAC areas.

First of all, consolidation is a long-term objective for big conglomerates. However, they are now focusing on buying out companies that have been going solo for a long time. For example, the Etro family has decided to sell a majority stake of their company to LVMH private equity firm L Catterton in a $646 million deal (The Fashion Law, 2021). Moreover, another established brand in the Italian luxury fashion market is Armani, that has fought for the independence of its company for many years now. It has been rival of other Italian brands such as Fendi and Gucci, which have been swallowed by LVMH and Kering, the two dominators of the luxury sector. However, going it alone in turbulent times can be arduous; therefore, Giorgio Armani is now listening to possible proposals from Exor, the holding company of the Agnelli family (The Financial Times, 2021)

Additionally, the vertical integration trend has been put in act in order to get efficiency gains in supply chains, gain more control in terms of quality and give artisan support in these turbulent times. An example of integration has been the partnership between Prada and Zegna in the acquisition of a controlling stake in the Italian cashmere producer Filati Biagioli Modesto. Both the Prada Group and the Zegna one, have been assigned a 40% shareholding each; meanwhile, the Biagioli family will hold 15% of the company and the rest will be assigned to Renato Cotto, the new CEO of the cashmere company. Furthermore, Gildo Zegna was appointed president while Franca Biagioli and Patrizio Bertelli, CEO of Prada, entered the board of directors (Prada, 2021).

Finally, strategies around digitalization and the sourcing expertise is a focus point in which many companies are relying on and investing now. This is due to customers’ demands, but especially for shifts in customer demographics in terms of generation. Moreover, the rapid changing trends and the transformation of the customer approach towards the shopping experience shifted the customer demographics in terms of generation. Millennials have always been consistent buyers of luxury goods. Nevertheless, another generation which is having an impact on brands’ strategies and contributes to a certain extent to the competitive advantage of certain companies is Gen Z. Studies forecast that this customer category will force brand to innovate their business model and prioritize certain values (Bain, 2021).

 

Here is a list of the latest M&A operation in the fashion luxury sectors, in addition to the ones stated above:

 

  • August 24, 2021 – Chanel takes majority stake in Italian knitwear company Paima
  • August 12, 2021 – Authentic Brands Group buys Reebok
  • July 28, 2021 – Aeffe Group takes full control of Moschino
  • July 20, 2021 – LVMH takes majority stake in Off-White
  • July 18, 2021 – L Catterton takes majority stake in Etro
  • June 30, 2021 – Richemont acquires Belgian luxury leather goods brand Delvaux
  • June 24, 2021 – Kering takes stakes in luxury retail Co. Cocoon
  • June 22, 2021 – Prada in partnership with Zegna take stake in Cashmere supplier
  • June 18, 2021 – LVMH takes full control of Pucci
  • April 22, 2021 – LVMH boosts stakes in Tod’s

 

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