How the luxury slowdown is impacting M&A

This article is part of our Advanced Membership package. To enjoy unlimited access to The Long View from Vogue Business, The Fashion Exec's Guide and Market Insights Reports, sign up for Advanced Membership here. The luxury slowdown has defined the market in 2024. That puts mergers and acquisitions (M&A) at an interesting intersection. On one hand, when the market is down, brands may not want to look for deals — and potential acquirers are more risk-averse in any case. On the other hand, a crisis presents the perfect opportunity to assess your portfolio. M&A was buoyant post-Covid; similarly, if the slowdown starts to ease in 2025, experts expect to see a pick-up in activity. “Historically I don’t think that a lot of deals happen during a downturn because companies don’t want to sell when the prices are not good, so that could be dampening the effect on the M&A activity here,” says Jelena Sokolova, senior equity analyst at investment insights firm Morningstar. Golden Goose, for example, pulled its IPO last year due to poor market conditions. Often a downturn will create a disconnect between the expectation of the seller and the price that the buyer is willing to pay. “This may block or freeze the process a bit, which is what we’ve seen in the past year and half — a lot of brand expectations did not necessarily align with their needs and what people were ready to pay,” says McKinsey partner Joëlle Grunberg, who leads the group’s luxury division in the US. Performance has been polarised, but growth has slowed for most luxury companies. “This year, even the best businesses weren’t in a position to pursue transactions because they didn’t feel they were putting their best foot forward,” says Marissa Lepor, director at US investment bank The Sage Group. When those stronger brands start to look for M&A, there’s likely to be a strong appetite, she says. “As we go into 2025 and brands start to benefit from the shift in consumer sentiment and spending, they’ll get into a financial position where they’re more excited to go to market. And ultimately, if brands are eager to sell and buyers are excited to pursue transactions, that’s when M&A happens.” We recap the biggest deals and almost deals in 2024 and outline what to expect in 2025. M&A in 2024: The year in review Despite the market conditions, there have been a few key deals announced over the past year. At the end of 2023, Kering closed its transaction to acquire a 30 per cent stake in Valentino, with the option to acquire the rest of the brand by 2028. In July, EssilorLuxottica bought Supreme from VF Corporation — a surprising move given the eyewear giant’s lack of experience with fashion. In July, Saks announced a deal to acquire Neiman Marcus. In September, LVMH cosied up to Moncler, acquiring a 10 per cent stake in Double R, the investment vehicle controlled by Moncler CEO Remo Ruffini’s holding company, which owns a direct stake in the Italian brand. In October, Mytheresa announced a deal to acquire struggling Yoox Net-a-Porter (YNAP), which will close early next year pending approvals. In the luxury e-commerce space, consolidation is the natural step after significant disruption (along with the challenges Farfetch and YNAP have faced, Matches also entered administration in March, just months after being acquired by Frasers Group in December 2023). Mytheresa has emerged as the unexpected winner with its curated brand mix and focus on the high-net-worth customer. “There’s quite a lot of consolidation going on because the industry is still relatively young and many companies are not generating a lot of cash,” says Sokolova. “It’s very much a shake-out and consolidation because many of these companies were overstretched and very dependent on the capital markets, and then growth slowed and access to capital dried out very quickly.” On the indie brand side, British womenswear label Roksanda was acquired by The Brand Group in May, while brand incubator Tomorrow Ltd has been reconsidering its portfolio, selling A-Cold-Wall to Frasers Group-owned distribution agency Four Marketing in November and selling concept store Machine-A to a private investor in December. Jacquemus announced it is looking for minority investment. And then, there were all the rumours and almost deals. Frasers Group has had its eyes on Mulberry, despite the handbag brand having twice rejected its takeover bid. Mulberry’s sales have been struggling for some time, predating the market slowdown, and as a significant minority shareholder owning 37 per cent of the brand, Frasers Group has expressed concern about its future. Meanwhile, there have been whisperings of Moncler acquiring Burberry, though both companies have denied the claims. These two cases point to the challenges facing British luxury. The most notable almost deal for 2024 was the Tapestry-Capri merger, which was called off in November after the US Federal Trade Commission (FTC) sued to block the deal, stating it would give the combined company a dominant share of the accessible luxury handbag market (the companies’ appeals were rejected, too). “I do think Tapestry got lucky because the deal might have hurt them — but the question is, what does it mean for the future of M&A?” says Jessica Ramírez, senior research analyst at Jane Hali and Associates. “The basis of why it was denied doesn’t make sense. It wasn’t accurate looking at today’s market, what brands look like and where consumers shop.” The antitrust ruling doesn’t make sense for a fashion deal, says Mario Ortelli, managing partner at M&A advisory Ortelli & Co. “The idea of antitrust is when you consolidate companies working in the same competitive arena and you come closer to a monopoly, so you can sell something the customer needs at the price that you want,” he explains. “A bag is not a basic necessity and you’ve got many alternatives in the market. Whether this peculiar decision will define a new course or be an exception, we’ll see.” Lepor of The Sage Group highlights that the deal would have impacted outlet malls, where Tapestry and Capri’s brands have significant overexposure. The landscape post-election in the US is expected to change: President-elect Donald Trump’s FTC is likely to be more pro-business and pro-M&A than outgoing president Joe Biden’s antitrust approach. “Post-election, the market [in the US] is quite strong and that will benefit the M&A market, so you could expect deals to ramp up where they make sense,” says Ramírez. Nevertheless, if tariffs and taxation negatively impact consumers there could be a disconnect. “If you get more M&A and these companies are growing, the consumer also needs to be in a good spot [to match that],” she says. What to expect in 2025 Experts predict 2025 to be relatively active for M&A. “M&A was [dampened] for at least 18 months, but now brands are in a situation where they either need money to fund their expansion or are at the end of the journey and require support. A few of these companies are at a turning point, so I think 2025 is going to be active,” says Grunberg. “I also think that when it’s difficult, people look for a good deal, so groups [will look at whether] they want to keep brands that aren’t good for business.” Who are the acquisition targets for 2025? Luxury fashion is already quite consolidated, and experts agree that heritage brands make the most coveted acquisition targets. “Buyers are looking for lifetime brands. The timeline from founding to acquisition is longer than other categories like beauty that focus on digitally native brands,” says Lepor. “You have this situation where the M&A play has happened already after many years. There are not many independent legacy brands — very few are on the market or for sale because they’re already more or less part of some group,” Grunberg adds. In this sense, one of the most interesting targets for 2025 is Capri-owned Versace. Now that the deal with Tapestry has been called off, Capri has been left worse for wear and is likely to reconsider its portfolio, experts say. “There are very few legacy brands that are up for deals, so if an interesting brand comes to the market — provided that the price they’re asking for is reasonable — I think there probably will be interest,” says Grunberg. The Moncler and Burberry rumours may have been dispelled, but don’t discount Burberry entirely as an acquisition target, experts agree. The market has responded well to new CEO Joshua Schulman’s turnaround strategy, and once it’s been executed, the brand could be in a healthier place to eventually look for a deal. Nevertheless, Burberry persistently highlights that investors are attracted to its independent status. In terms of acquirers, Prada Group has been outperforming the market, with Miu Miu doing particularly well. “Potentially, players like Prada might be interested in consolidating the market, so maybe they want to diversify from the strong performance at Miu Miu and make the group bigger,” says Sokolova. OTB Group also has a considerable “appetite for acquisition” and is “looking to expand”, according to Ortelli. Qatari investment fund Mayhoola has also been relatively quiet after selling Valentino, investors highlight. LVMH and Kering are likely to focus on getting their existing portfolios in check rather than acquiring more brands, analysts predict. “Bigger groups are not interested in a turnaround story at the moment. The groups have bigger priorities in their existing portfolios,” says Ortelli. “In luxury, the strategics always look for acquisition from an opportunistic and optimistic view — there is a brand with a strong valuation that wants to sell and there’s a strategic case to buy it.” There’s increasing opportunity across up-and-coming brands, however. “There’s a new wave of brands like The Row, Toteme, Khaite and TWP, which have started to be seen as luxury but aren’t necessarily competing with Hermès, Gucci and Chanel — and they are really offering apparel and accessories for everyday wear,” says Lepor. “The Row is the one that’s been around for the longest, and ultimately, there is interest in the brand presenting a unique M&A opportunity down the line to create this new generation of everyday luxury.” The best buyers for these brands might be high-net-worth individuals and family offices, because they won’t look to flip the already healthy businesses to a new buyer, Lepor adds. “These businesses over time have developed a secret sauce. There’s definitely an opportunity to combine the successful contemporary brands that have been around for 10 to 20 years if someone who has industry expertise would be interested in doing that, but it has to be the right angle,” she says. “The brands that do that the best aren’t going away, and whether the strategics acquire them next year or in the future, they’ll definitely be interested in acquiring them because the magic of fashion is intangible.” To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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