The third edition of Deloitte’s ‘Fashion & Luxury: Private Equity and Investors Survey 2018’ report indicated that growth is expected to rise even above 10% in the digital luxury goods and cosmetics and fragrances sectors, while apparel and accessories, watches and jewellery, the hotel and the furniture industries are expected to post annual growth rates between 5% and 10%.
Of the investors interviewed, 78% hold one or more assets in luxury and fashion. The survey confirmed the luxury sector is highly attractive, though a slow-down in M&A operations was noted, especially in terms of their size, which was significantly smaller than in the past: while the number of operations is growing, they are now less substantial. According to Deloitte, the average M&A deal value fell considerably, from $449 million in 2016 to $230 million a year later (down by 49%).
Apparel & Accessories is the most dynamic sector with 36% of the M&A transactions among Luxury Goods companies, wgile watches & jewellery was the only sector from personal luxury goods to decline.
While the number of M&A transactions remained flat in North America and Asia Pacific, Europe recorded an increase of 14 offers. Luxury hotels were the main M&A drivers globally in 2017, with operations in all geographies, except for Japan and the Middle East.
The Fashion & Luxury market is expected to grow 5-10% annually within the next three years driven by the Digital Luxury and Cosmetics & Fragrances sectors, which are growing by more than 10% a year.
The Apparel & Accessories, Watches & Jewellery, and Hotels and Furniture sectors could experience a consolidation phase, with an expected annual growth of 5-10%. The private jet market should remain stable with annual growth of 0-5%; however, investors expect a slowdown in growth for the automotive, yacht, and selective retailing markets.
“Compared to 2017, the constant trend for consolidation in the fashion and luxury industry has an impact on investments, which are shifting (+10 percentage points) towards smaller-sized companies whose performance investors are looking to stimulate by deploying internationalisation strategies and introducing management changes,” said Lisa Lauv, M&A Transaction Services partners at Deloitte, in a press release.
In 2017, 217 M&A transactions were completed in the luxury goods market, six more deals than in 2016. In 2016 however, there were 70 more transactions than in the previous year. Specifically, 134 operations were completed in the personal luxury goods segment (5 more than in 2016), of which 77 were in the apparel and accessories sector (+8) and 28 in fragrances and cosmetics (+6). Only watches and jewellery posted a downturn in the number of transactions (29, compared to 38 in 2016).
Geographically, Europe is the only region in which the number of transactions increased (109 deals in 2017 vs 95 in 2016), chiefly thanks to the apparel and accessories sector (+9 deals). North America and Asia-Pacific recorded the same number of deals as in the previous year, respectively 59 and 36 transactions, though last year they were the leading regions.
“Investors are anticipating that Asian and Middle Eastern players will stimulate the industry’s growth. The forecast for North America is positive (an annual growth rate between 5% and 10%) but the estimates are below those of 2017. Latin America will remain stable. For Japan, the outlook is better than what was expected last year, with investors envisaging an annual growth between 5% and 10%,” said Lisa Lauv.
In 2018, 89% of investment funds are envisaging investing in the fashion and luxury sector, with a growing interest in apparel and accessories (in which 73% of them are trying it invest), while watches and jewellery have lost some of their appeal.
More from OPPORTUNITIES
Rosewood Hotels & Resorts® today announces the launch of #RosewoodGirlfriends, a new brand initiative that celebrates lifelong friendships and the …
One of the world's finest luxury hotel groups, Oetker Collection which owns most of its properties hotels such as Hotel …
Farfetch will complete by the end of this week its much-anticipated initial public offering (IPO) on the New York Stock …