Global and Italian M&A Insights:
Issue 1/21 – Fashion & Luxury market
March 2021 Pw C | M&A Industry Insights | Consumer Markets
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Table of Contents M&A Fashion Investing in the fashion space before, during and after the pandemic An interview to Roberta Benaglia from Style Capital SGR SpA
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Fashion – Global M&A Quarterly Trends by sub-industry
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Fashion – Italian M&A Quarterly Trends by sub-industry
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Fashion – Global Deals Volumes - Corporate vs. PE
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Fashion – Italian Deals Volumes - Corporate vs. PE
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Top ten Global Fashion deals 2020
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Key Contacts
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Pw C | M&A Industry Insights | Consumer Markets
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Investing in the fashion space before, during and after the pandemic About STYLE CAPITAL STYLE CAPITAL SGR S.p.A. is active since 2007 in the promotion and management of private equity funds, and currently acts as the management company of the closed-end fund DGPA CAPITAL (entirely divested) and the industry-focused fund STYLE CAPITAL that started its investing activity in 2017. STYLE CAPITAL operates in the “Lifestyle” segment, supporting the growth of SMEs operating in the global market, whose distinguishing features are creativity, design, product quality and uniqueness, selective distribution and innovation, with a specific focus on Fashion & Luxury brands. The purpose of STYLE CAPITAL is to invest in either majority or minority stakes, through capital increases, share purchases and soft LBOs. Track Record Exited Investment Current Portfolio Shoes, accessories and apparel in the casual luxury segment Shoes, accessories and apparel in the fast fashion women segment
Italian market leader in the high luxury jewelry
Contemporary ready-to-wear segment womenswear
Italian market leader in the man beachwear segment
Luxury and digital native denim brand, focused on upcycling and sustainability
Contemporary designer apparel and accessories
Luxury ready-towear womenswear
2.B | Consumer Products | Executive Summary
An interview to Roberta Benaglia, CEO of Style Capital SGR SpA and Roberto Gattoni Investment Director Style Capital SGR SpA Roberta, you have just completed a majority investment in Zimmermann with a $0.4bn deal (one of the top 10 largest Fashion deals of 2020). What’s your view on the M&A outlook in 2021? Which are the hottest segments where you would like invest? Given the proposition of our fund, we do not have particular restrictions on geographies/size and type of deals, which gives us a certain flexibility on the opportunities arising in the M&A market, in Italy and abroad. We still have 3 years of investment ahead, and, as of today we have invested c. 55% of our fund. Our goal is to complete 1 or 2 deals by the end of 2021, preferably looking at cross-border opportunities with a strong “digital angle”.
The Management Company provides not only financial resources, but active support to entrepreneurs and managers in their strategic decisions and management activities, thanks to the vast experience of Mrs. Roberta Benaglia (CEO), Mr. Gaetano Marzotto (President) and the investment team in the Fashion & Luxury sector.
In terms of sectors, we are focused on the fashion & luxury segment, and to complete our portfolio we are looking at targets in the accessories and sportswear/activewear segment.
Thank s to its hands-on approach, strong financial background, in-depth knowledge of the sector and a solid and outstanding trackrecord, STYLE CAPITAL aims to become the ideal partner for supporting the business and bolstering the growth of the companies in its portfolio.
We have seen very interesting platform deals in the supply chain (shoes / apparel manufacturing, components, etc…), , but our core competence is the brand strategy, the development of channels (wholesale / retail / e-commerce), the international growth, rather than the realization of industrial synergies.
The management company’s flexible and fast decision-making structure, as well as an investment policy with an industry-driven approach, focused on business projects as well as on financial structure, allows STYLE CAPITAL to target a vast range of transactions, in terms of size (with a preference for growing Company with revenues between €20 and €50m) and investment type (primary and secondary deals, buy-out, club deals with a leading role as industry expert,..). Pw C | M&A Industry Insights | Consumer Markets
We do not exclude to complete small-size add-ons on our portfolio companies and maybe to diversify in the cosmetics space. 3
Investing in the fashion space before, during and after the pandemic After the successful exit from Twin Set in 2012 an Golden Goose in 2015, Style Capital completed 4 acquisitions of fashion brands (Forte Forte, RE/DONE, MSGM, Zimmermann): how did your portfolio companies face Covid-19 emergency? Generally speaking, in the fashion space the direct retail channel has been more adversely hit than the wholesale, which was capable to react with direct marketing initiatives during the lockdown period, leverage on proximity shopping, faster re-opening, increased use of e-commerce (c. 50%60% of volumes from March onwards have been absorbed through this channel). Mono-brands suffered the most (and are expected to keep suffering). Our portfolio companies have a relatively agile business model, with a limited direct retail exposure compared to the major luxury brands. In addition, backed by a financial investor, they were able to grant favorable conditions to the wholesale channel, that allowed to stimulate the recovery. As almost everyone else, we relatively increased the markdowns, confident it is a temporary measure required by this emergency situation. Furthermore, both Re/Done and Zimmermann operate on a global market, with only a limited portion of sales in Europe, where the recovery appears to be slower than in US and Asia, and have a strong own e-commerce, that recorded amazing performances, balancing the decline in offline sales.
Pw C | M&A Industry Insights | Consumer Markets
2.B | Consumer Products | Executive Summary
…so which are the most important lessons learnt in this 2020?
Why it is crucial to develop an effective digital communication strategy?
First: digitalization (collect data, establish trends and use them for better business decisions) and e-commerce. We do not expect that the growth of the e-commerce channel will represent a permanent switch from the retail: we do expect a strong recovery in the physical retail, as soon as social distancing measures will soften, but business and personal travels will not recover so fast, therefore it will be of utmost importance to refocus merchandising mix and location on local customers.
For Italian brands top priorities are quality of materials, craftmanship, product innovation and finally the communication.
E- commerce peak is going to normalize in 2021, requiring a convergence between on-line and off-line channels from both brands that have developed their own web-site, aside to the increased use of e-tailers, and pure e-commerce players, which have been opening physical stores in the most important cities. Second: Direct retail is facing a crucial challenge requiring to reconfigure locations and formats to meet the new customer demand and emerging needs. As a result, several lease contracts (in particular the most expensive ones) have been terminated in advance or renegotiated, certain stores have been downsized and others have been relocated. New openings should be now focused on residential areas and resort locations more than traditional Tier 1 cities, following the increased smart working. And this was exactly one of the key factors that drove our recent investment in Zimmermann, which embodies the party/resort style and has a direct retail presence in the resort locations. Third, communication: the budget for off-line communication (typically high) has been cut and switched to digital communication and this will likely be a permanent move.
For American brands it’s the opposite: communication, innovation, product. Products are developed based on what it is more effective to communicate at a certain point of time and then created keeping in mind the designed communication strategy, in order to offer an attractive product which has to be profitable for the seller. Italian brands suffered more than American ones since focused on values which the customer can not “digitally touch” and remained unable to develop an appropriate communication style or shift their offering on products more easy to communicate (and sell) digitally. And therefore do you believe that emerging brands reacted better than traditional ones to the crisis? Emerging brands with a good digital communication strategy and a strong e-commerce presence before the crisis started were definitely in a better position, however, during the most critical phase of the Covid-19 emergency, buyers had to cut their budgets and preferred to leave space to traditional big brands and assortments focused on carry over, rather than to new brands / products to minimize the risk of unsold, and were asking flexible payment terms, which typically emerging small brands can not afford. On the opposite, in 2H21 we expect emerging brands to experience a rebound for increased customers’ appetite for new products.
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Fashion – Global M&A Quarterly Trends by sub-industry Despite the spread of COVID-19 pandemic, in 2020 investors confirmed their interest for the Fashion industry, with 2 large deals made by VF Corp (Kontoor brands spin off and acquisition of Supreme from Carlyle)
Fashion, Global Deal Value and Volume Q1’18-Q4’20 • VF Corporation acquisition of Kontoor Brands for $2.1bn • ANTA, FV Fund, Anamered Investments Inc and Tencent Holdings acquisition of Amer Sports for $5.4bn • Michael Kors acquisition of Versace for $2.1m
• Permira acquisition of Golden Goose for $1.4m
• VF Corporation acquisition of Supreme for $2.4bn • Moncler acquisition of Stone Island for $1.5bn
250,0
14000,0
12000,0 200,0
150,0
8000,0
6000,0
100,0
4000,0 50,0 2000,0
-
Q1'18
Q2'18
Q3'18
Accessories
Q4'18 Apparel
Q1'19
Q2'19
Supply chain
Q3'19 Footwear
Q4'19 Other
Q1'20
Q2'20
Sportswear
Q3'20
Q4'20
-
Deal Value (US$m)
Deal Volume
10000,0
Deal Volume Apparel Accesories Supply chain Footwear Sportswear Other Total Deal Value (€m) Apparel Accesories Supply chain Footwear Sportswear Other Total
247 26 160 56 54 132 675
Delta FY20 vs. FY19 (15%) (57%) (22%) 6% 0% (13%) (17%)
FY20 8,710 161 1,765 3,084 1,833 1,876 17,429
Delta FY20 vs. FY19 72% (74%) (57%) 180% 97% (34%) 19%
FY20
Deal Value
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 44% of deals at Global level and c. 15% at Italian level
Pw C | M&A Industry Insights | Consumer Markets
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Fashion – Italian M&A Quarterly Trends by sub-industry The 2020 strong increase of Italian Fashion market in terms of deal value (+$1.3bn vs 2019) is impacted by two mega deals in 1Q (Golden Goose/Permira) and 4Q (Stone Island/Moncler). The decline in volumes is the result of a drop in small transactions in the pandemic period. Accessories is the sub-sector most severely hit by the pandemic downturn in terms of volume (-77%) Fashion, Italy Deal Value and Volume Q1’18-Q4’20
• Chanel SAS acquisition of 40% stake in Renato Corti for $169m
25,0
• Golden Goose sold to Permira for $1.3bn
2000,0
1500,0
15,0
10,0
1000,0
5,0
500,0
-
Q1'18
Q2'18
Q3'18
Accessories
Q4'18 Apparel
Q1'19
Q2'19
Supply chain
Deal Volume
2500,0
20,0
Deal Volume
• Stone Island acquisition by Moncler ($1.46bn) • Zimmermann acquisition by Style Capital (~$0.4bn)
• Farfetch acquisition of New Guards Group Holding for $675m
Q3'19 Footwear
Q4'19 Other
Q1'20
Q2'20
Sportswear
Q3'20
Q4'20
Deal Value (US$m)
• Michael Kors acquired the entire share capital of Gianni Versace SpA ($2.1bn)
Apparel Accesories Supply chain Footwear Sportswear Other Total Deal Value (€m) Apparel Accesories Supply chain Footwear Sportswear Other Total
FY20 9 3 9 6 2 1 30
Delta FY20 vs. FY19 (50%) (77%) (44%) 0% (71%) 0% (51%)
FY20 414 1,398 1,459 3,271
Delta FY20 vs. FY19 (50%) (100%) n.a. 100% 100% n.a. 177%
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Deal Value
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 44% of deals at Global level and c. 15% at Italian level
Pw C | M&A Industry Insights | Consumer Markets
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Fashion – Global Deals Volumes - Corporate vs. PE Corporate deals historically represents ca. 70% of total deal volumes in the Fashion industry. FY20 shows a decline in volumes (-18%), with a growth in PE driven deals in 4Q (37% vs an historical average of ca. 30%)
Corporate vs Private Equity - deal volumes Global Fashion Market Q1’18
Q2’18
Q3’18
Q4’18
Q1’19
Q2’19
Q3’19
Q4’19
Q1’20
Q2’20
Q3’20
Q4’20
FY18
FY19
FY20
Total
237
211
196
225
205
206
220
184
190
137
176
172
869
815
675
Corporate
67%
66%
69%
74%
71%
72%
69%
70%
71%
76%
73%
63%
69%
71%
71%
PE
33%
34%
31%
26%
29%
28%
31%
30%
29%
24%
27%
37%
31%
29%
29%
Corporate PE Total
Corporate – Cross Border
Corporate - Domestic
Corporate - Unknow n
PE – Cross Border
PE - Domestic
FY20 477 198 675
Delta FY20 vs.FY19 -17% -18% -17%
PE - Unknow n
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 44% of deals at Global level and c. 15% at Italian level
Pw C | M&A Industry Insights | Consumer Markets
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Fashion – Italian Deals Volumes - Corporate vs. PE Differently from the global market, the number of deals is well balance between corporates and PEs, driven by a strong interest of both local and international PEs on Italian Target. M&A was more severely hit in FY20 than in the Rest of the World (-50% in volumes), with PEs sponsoring 63% of the transactions announced Corporate vs Private Equity - deal volumes Italian Fashion Market Q1’18
Q2’18
Q3’18
Q4’18
Q1’19
Q2’19
Q3’19
Q4’19
Q1’20
Q2’20
Q3’20
Q4’20
FY18
FY19
FY20
Total
15
9
9
15
8
13
23
17
8
4
3
15
48
61
30
Corporate
40%
44%
56%
60%
50%
23%
48%
41%
63%
50%
33%
20%
50%
41%
37%
PE
60%
56%
44%
40%
50%
77%
52%
59%
38%
50%
67%
80%
50%
59%
63%
Corporate PE Total
Corporate – Cross Border
Corporate - Domestic
Corporate - Unknow n
PE – Cross Border
PE - Domestic
FY20 11 19 30
Delta FY20 vs.FY19 -56% -47% -51%
PE - Unknow n
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 44% of deals at Global level and c. 15% at Italian level
Pw C | M&A Industry Insights | Consumer Markets
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Top ten Global Fashion deals 2020
Top deals are balanced between PE and Corporate. 3 of the most important FY20 deals involved targets specialized in casual apparel and shoes (Supreme, Stone Island and Golden Goose) Top 10 Global Fashion Deals, 2020 Target
Buyer
Deal type
Sector
Deal size (US$m)
1
Supreme
VF Corporation
Corporate
Apparel
2,400
2
Stone Island
Moncler
Corporate
Apparel
1,459
3
Golden Goose
Permira
PE
Footwear
1,395
4 5
Shoe Palace
Genesis Holding (JD Sports)
Corporate
Footwear
681
Ascenta Retail Group
PE
Apparel
540
6
Premium Apparel (Sycamore Partners)
IT
Brooklyn Investment
PE
Apparel
463
7
BOA
Compass Diversified
Corporate
Sportswear
454
8
Ningbo Yinzhou Jielun Invest
Ningbo Shanshan
PE
Apparel
443
Precor
Peloton Interactive
PE
Sportswear
420
Zimmermann
Style Capital
PE
Apparel
9 10
~ 400
Source: Refinitiv and PwC Analyses, based on closed and pending deals, allocated to quarters based on the announcement date. Deal value available for c. 44% of deals at Global level and c. 15% at Italian level
Pw C | M&A Industry Insights | Consumer Markets
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Key Contacts Pw C | M&A Industry Insights | Consumer Markets
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Key Contacts
Emanuela Pettenò
Partner | Consumer and Markets Deals Leader +39 348 8519841 Email
Pw C | M&A Industry Insights | Consumer Markets
Anna Nasole
Director | Transaction Services +39 345 4888390 Email
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Thank you!
This content is for general information purposes only, and should not be used as a substitute for consultation w ith professional advisors. © 2021 Pw C. All rights reserved. Not for further use and distribution w ithout the permission of Pw C. “Pw C” refers to the netw ork of member firms of Pricew aterhouseCoopers International Limited (Pw CIL), or, as the context requires, individual member firms of the Pw C netw ork. Pw C | M&A Industry Insights | Consumer Markets
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