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Fashion & Luxury Private Equity and Investors Survey 2019 - Global Report Summary

Core Content

The Fashion & Luxury (F&L) Private Equity and Investors Survey 2019 provides an in-depth analysis of market trends, M&A activity, and investor strategies in the F&L industry during 2018 and expectations for 2019. The report highlights the growing interest in the sector, despite market challenges such as disruptive technologies and changing competitive landscapes. It also discusses the shift in investment focus and the increasing role of digital strategies in driving growth and performance.

Main Points

M&A Deal Monitor 2018

• Total M&A deals in 2018: 265, up by 47 compared to 2017.
• Growth by sector:
  • Cosmetics & Fragrances: +16 deals, contributing 17% of total.
  • Hotels: +29 deals, the top gainer.
  • Furniture: +3 deals.
  • Cruises: +3 deals.
  • Restaurants: +3 deals.
  • Yachts: +1 deal.
  • Apparel & Accessories: -4 deals.
  • Watches & Jewellery: -1 deal.
  • Cars (including Electric Cars): +4 deals.
• Average deal value: $233m in 2018, with a slight increase of $3m from 2017.
• Regional growth:
  • Europe: Strongest growth with +41 deals.
  • Asia-Pacific: Slight increase, driven by Watches & Jewellery.
  • North America and Middle East: Flat compared to 2017.
• Top deals of 2018:
  • Beijing Electric Vehicle Ltd. by BAIC BluePark New Energy Technology Ltd. ($3,620m)
  • Belmond Ltd. by LVMH Group ($3,310m)
  • Gianni Versace SpA by Michael Kors Holdings Limited ($2,162m)
  • Silversea Cruises Ltd. by Royal Caribbean Cruises Ltd. ($1,513m)
  • Boat Holdings, LLC by Polaris Industries Inc. ($717m)
  • Ekornes ASA by Qumei Investment AS ($702m)

Private Equity and Investors Survey 2019

• Investor expectations:
  • F&L industry is expected to grow by 5–10% annually over the next three years.
  • Cosmetics & Fragrances, Digital Luxury Goods, and Furniture are projected to grow by more than 10%.
  • Hotels, Restaurants, and Apparel & Accessories are expected to grow by 5–10%.
  • Cars and Private Jets are forecast to shrink.
  • Yachts, Watches & Jewellery, and Selective Retailing are expected to remain stable.
• Investor sentiment:
  • Asia and the Middle East are seen as key growth drivers.
  • North America has a positive outlook but with a decreased sentiment.
  • Europe, Latin America, and Japan are expected to remain stable.
• Exit and investment strategies:
  • 43% of funds plan to divest at least one F&L asset in 2019, an increase of +8.2 percentage points from 2018.
  • 70% of funds plan to invest in F&L assets in 2019.
  • Apparel & Accessories and Cosmetics & Fragrances remain the most attractive sectors for investment.
  • Digital Luxury Goods interest declined.
  • Strategic investors are the main drivers of deal growth in 2018, with 57% of transactions involving them.
  • Financial investors increased their share of exits from 36% to 43% in 2018.
• Deal structure and funding:
  • Management Buyout (MBO), Expansion capital, and Leverage Buyout (LBO) are the main deal strategies.
  • Senior debt remains the most common funding source (44%).
  • Shareholders' loan usage increased to 28%.
  • Majority stakes are still the preferred investment type, with a 25% increase in minority stakes.

Key Findings

• Market Segmentation:
  • The F&L industry is segmented into more than ten sectors, with Personal Luxury Goods (PLG) representing 55% of M&A deals in 2018.
  • PLG (Apparel & Accessories, Cosmetics & Fragrances, Watches & Jewellery) is the most active segment.
• Deal Size and Multiples:
  • Small-sized companies (<$50m) dominate M&A activity, accounting for 65% of deals in 2018.
  • 5–10x EV/EBITDA multiple increased significantly to 42% of deals in 2018.
• Investor Propensity:
  • Apparel & Accessories and Cosmetics & Fragrances are the most attractive sectors for both current and potential investors.
  • Furniture is also gaining interest, showing a notable increase.
  • Selective Retailing and Digital Luxury Goods are expected to be medium to large-sized.
• Growth Strategies:
  • Internationalization and Performance improvement are the top strategic drivers.
  • Digital strategy design is becoming increasingly relevant, with a +20 percentage point increase in sentiment from 2018.
• Return Expectations:
  • Investors expect returns ranging from 21% to 30%, with 11% forecasting >30%.
  • Disruptive technologies (AI, Big Data, IoT) are expected to have the largest impact on portfolios.

Conclusion

The F&L industry remains a dynamic and attractive market for private equity and investors. The focus is shifting towards smaller companies and digital transformation, with Asia and the Middle East emerging as key growth regions. Strategic investors are playing a pivotal role in driving M&A activity, while digital strategies are becoming a critical lever for growth and performance improvement.