Introduction: Why is M&A prospering in the fashion industry?
M&A, a term widely used nowadays, stands for mergers and acquisitions which are two different concepts involving a common goal to combine two companies into one. In the corporate field, these processes are frequently opted by companies but in the fashion industry it was a bit obscure until the past two years when major successful M&A deals were cracked by the global fashion houses which showed that the fashion space is also getting in the line with other sectors with respect to M&A. The most significant reason for M&A in the fashion sector could be the realisation of synergies that cannot be generated unless two companies merge. Another popular driving force is the financial crisis faced by companies. Successful M&A deals could be extremely advantageous for both the parties in a way that it escalates the reach of the brands to those areas or countries where it is less known and a bumper rise in stocks of the companies is generally observed. It also accelerates the sale of small brands when acquired by prestigious fashion houses. However, it is always advised to have a thorough analysis before entering into an M&A transaction as an unsuccessful deal may lead to incalculable losses too. This article discusses the top 5 successful global M&A transactions in the fashion industry.
Chanel and Paima
Chanel, one of the biggest French fashion luxury maison, has become a household name these days. Be it protecting its trademarks by filing lawsuits or acquiring other brand companies and suppliers to expand its outreach worldwide, Chanel stands at the top of the pile. Chanel’s affection for Italian artisanal excellence is evident from its continuous collaborations and investment in Italian brands. Recently, Chanel acquired another Italian company Paima having its line of business in knitting outerwear by taking a majority stake in the company. Paima has set a benchmark in an unconventional genre of the textile industry i.e. knitwear which has accelerated its development in recent years[1]. Chanel, with an aim to empower the craftsmanship sector and of course for strengthening its business, made a huge investment in acquiring Paima.
Authentic and Reebok
In 2006, Adidas bought Reebok for $3.9 million as a result of an intellectual property lawsuit to compete with its favourite rival Nike but this acquisition did not stand up to the expectations of Adidas and eventually in 2019, it planned to divest Reebok due to some financial struggles. The deal was finalised in 2021 at approximately $2.5 billion and Reebok was acquired by Authentic Brands Group (ABG), an American brand management company that also owns other eminent brands like Forever 21 and Brook Brothers. With this acquisition, ABG committed to taking forward Reebok’s legacy and protecting its integrity and brand value in the market[2].
Flipkart and Myntra
Myntra, the fashion e-commerce platform widely known today, was once undervalued and cash strapped when Flipkart entered into the frame to rescue. Flipkart, is an Indian e-commerce giant that acquired 100 % stakes in Myntra through a deal that cost US $280 million in 2014. The point to be highlighted here is that the acquisition did not affect the operation of both the companies as they continued to function independently just like before. This acquisition turned out to be a win-win situation for both the entities in a way that enabled Flipkart to venture into the untapped fashion space and revitalised Myntra’s sale by huge capital investment of Flipkart[3].
Exor and Louboutin
Exor is an European company controlled by the Agnelli family having a history of great investments which notably includes Ferrari and the international newspaper The Economist. On the other hand Christian Louboutin is a French-Egyptian fashion designer famous for his high-end stiletto with shiny red sole. His company Christian Louboutin Ltd. deals with iconic men’s and women’s footwear, handbags, fragrances and other accessories. In 2021, Louboutin partnered with the Agnelli family by selling its 24% stake to Exor. The acquisition deal was sealed for 540 million Euros. Exor is popular for making grand investments in diverse sectors and this acquisition would be beneficial to mark its footing in the fashion market. Also, this deal enabled Louboutin to expand its reach to some big countries like China as Exor has recently acquired a Chinese fashion house.
LVMH and Pucci
LVMH Moët Hennessy Louis Vuitton is a conglomerate and French holding MNC specialised in luxury goods. LVMH came into existence after various merger deals including a merger between Louis Vuitton and Moet Hennessy which itself was a merger between Moet & Chandon and Hennessy. It has acquired 60 subsidiary luxury fashion brands including Christian Dior, Fenty, Bulgari and Mark Jacobs. Emilio Pucci was an Italian fashion designer well known for designing women apparel and accessories with an Italian taste. LVMH acquired 67% stakes in Pucci in 2000 and in continuation of its legacy, it has now acquired the remaining 33% stake as well leaving no control in the hands of the family of the founder Emilio Pucci[4].
LVMH and Tiffany & Co.
Tiffany is a world famous American luxury powerhouse known for its jewellery creations whereas LVMH is a globally leading luxury products group. In 2020, LVMH acquired Tiffany at $15.6 million making it the world’s biggest M&A deal in the fashion industry[5]. This acquisition has largely benefited LVMH as it transformed the watches and jewelry sector of LVMH and adjunct the other distinguished subsidiary luxury brands owned by LVMH[6].
[1] Chanel acquires Italian knitwear business Paima, FASHION NETWORK (Sep.30, 2021, 8:40 PM), https://ww.fashionnetwork.com/news/Chanel-acquires-italian-knitwear-business-paima,1327632.html.
[2] Adidas to sell Reebok to Authentic Brands Group, ADIDAS (Sep.30, 2021, 5:18 PM), https://www.adidas-group.com/en/media/news-archive/press-releases/2021/adidas-sell-reebok-authentic-brands-group/.
[3] Eshvar Girish, Flipkart’s acquisition of Myntra : a win-win for both, iPLEADERS (Oct.1, 2021, 7:35 PM), https://blog.ipleaders.in/flipkarts-acquisition-of-myntra-a-win-win-for-both/.
[4] Precious Oluwatobi Emmanuel, Recent Luxury Mergers & Acquisitions in the Fashion World, FASHION LAW JOURNAL (Oct.1, 2021, 10:23 AM), https://fashionlawjournal.com/recent-luxury-mergers-acquisitions-in-the-fashion-world/.
[5] Precious Oluwatobi Emmanuel, Recent Luxury Mergers & Acquisitions in the Fashion World, FASHION LAW JOURNAL (Oct.1, 2021, 10:23 AM), https://fashionlawjournal.com/recent-luxury-mergers-acquisitions-in-the-fashion-world/.
[6] LVMH completes the acquisition of Tiffany & Co., LVMH (Sep.30, 2021, 8:50 PM), https://www.lvmh.com/news-documents/press-releases/lvmh-completes-the-acquisition-of-tiffany-and-co/.
YLCC would like to thank Neha Gururani for her valuable insights in this article.
