Fashion trends may change with seasons, but one that has never gone out of style is the appetite for brand acquisition by groups both in and out of the 230 billion euro luxury sector.
Big-name deals in the last 12 months have primarily involved private equity groups, including a buyout of Roberto Cavalli by the Italian company Clessidra in April and investment in Proenza Schouler by Castanea Partners of Massachusetts in June. That activity followed years of industry consolidations, largely fueled by an arms race for acquisitions between the leading luxury conglomerates LVMH Moët Hennessy Louis Vuitton and Kering.
But the slowdown in demand from China as a result of its cooling economy, coupled with continuing currency volatility, has damped growth — and has probably led to more caution in spending for many major companies.
“The fact that expansion in the industry will be more difficult to achieve going forward has prompted some companies to take a more prudent approach to costs and capital allocation, including when looking at possible mergers and acquisitions,” said Luca Solca, head of luxury research at Exane BNP Paribas.
Prudent does not mean entirely paused however, and conversations, as well as rumors, persist.
So which brands, if any, could be takeover candidates? Following are some of the names most mentioned as attractive targets.
Mr. Solca calls Salvatore Ferragamo, the Florentine brand that showed its spring collection in Milan on Sunday, “the most desirable and likely acquisition target in the medium term.”
Italian mid-range brands have drawn attention in the past from cash-rich conglomerates that could feed global expansion plans — another name frequently thrown into the ring is Missoni.
But a slower Asian market means that strategy has plateaued for many, and the chief executive of Ferragamo, Michele Norsa, has consistently denied that the brand, which listed on the Hong Kong Hang Seng index in 2011, is for sale.
Accessories are an area experiencing an uptick in mergers and acquisitions. Rumors floated this year that Sergio Rossi, the Italian shoe brand, was on the block and that Kering, its owner, was in advanced sales talks after a strategic review. This month, the Italian buyout firm Investindustrial was said to be in advanced talks as the buyer.
Tiffany & Company
Known for its engagement rings and little blue boxes, Tiffany has had its share price fall 30 percent since the start of this year, reducing its valuation and therefore, making it more affordable to a potential bidder. (Watches and jewelry remain a prime area of potential consolidation.)
The American jeweler, a public company, has long been seen as a possible target. However, given its size and a recent improvement in the company performance, the odds of a takeover are currently unlikely.
A splintering of demand — caused by the rise of digital media and the increasing sophistication and diversification of consumer tastes — has meant that many shoppers have turned away from mega- labels such as Gucci or Louis Vuitton in favor of smaller, independent names. A stake-building war emerged between LVMH and Kering, with the French luxury powerhouses eyeing smaller brands with long-term growth potential.
Victoria Beckham, based in London, is said to have received approaches from both groups, although a spokeswoman said this year that the brand had “no current plans to sell any part of the business.” Watch this space.
Another crucial reason for the smaller- brand buyouts is securing young talent for future development and Simone Rocha, one of the brightest young things on the London scene, has received multiple investment overtures. In recent years LVMH has taken stakes in Marco de Vincenzo and J.W. Anderson, also naming its designer, Jonathan Anderson, creative director at its Spanish fashion house Loewe.
At the same time, Kering has bought a controlling stake in the London designer Christopher Kane’s brand and made an investment in Joseph Altuzarra in New York. But Kering now says that those investments are no longer a priority.
“Currently, there is nothing in our acquisition pipeline, and our focus is on organic growth” said Jean-François Palus, Kering’s group managing director. “Our main focus is on building up and expanding brands we already have, including smaller brands like Christopher Kane and Tomas Maier, where we can use our distribution channel or store building power to help consolidate the businesses.”
Rag & Bone
In the United States, contemporary brands’ stylish wares, at more accessible prices than high luxury labels, have gained attention and are attracting interest from Europe.
The Rag & Bone partners David Neville and Marcus Wainwright took investment from the private equity firm Irving Place Capital in 2013 and are now rumored to be considering further minority stakeholders to fuel the growth of the business, which recently opened flagships in London, Tokyo and Hong Kong.
“Smaller American sellers are aware that strategic partnerships can add significant value to a deal,” said Gary Wassner, co-chief executive of Hilldun, a New York group that helps finance young designers.
He added that the buyout market for smaller brands — particularly in the United States — remains “incredibly active.”
“In the past, strategic meant primarily sourcing partners,” he continued. “Now it means executive level support as well — the kind and level of support smaller brands cannot necessarily afford to hire on their own, even with an investment partner.”
An earlier version of this article misstated the name of a New York company that helps finance young designers. It is Hilldun, not Hillman.