The future of luxury sector companies in a global competitive

environment

M&A transactions in the luxury sector: Past trends Vs New strategies

IS SYNERGIES CREATION THE MAIN REASON FOR M&A TRANSACTIONS?

REASONS THAT SHOULD DRIVE YOUR CHOICE IN M&A DEALS:

Synergies and Value Creation

1. Economies of Scale
2. Greater Pricing Power
3. Combination of Different Functional Strengths
4. Higher Growth in New or Existing Markets

What is the dominant element?

FINANCIAL MARKET AND INVESTORS ARE

MAINLY INTERESTED IN SALES GROWTH

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What happened in the luxury market in the past

TODAY?

[Project name] – [Date] 3

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Growth of big luxury companies

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First move: add new brands… but new brands have to be complementary

NEED TO COVER
PRODUCT RANGE
BUT ALSO STYLE
AND PRICE
POSITIONING TO
AVOID
CANNIBALISATION

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Positioning in the luxury ready to wear sector

Luxury

High

Medium

Fashion wear Classic wear

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Jewellery sector positioning

High
PRICE POSITIONING

Medium

Low

Classic Contemporary

SEGMENT

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 Need to complete product range

- 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Brunello Cucinelli 85% 15%

(2)
Armani 61% 37% 3%

(1)
Versace 60% 35% 2% 3%

Burberry 57% 36% 7%

Roberto Cavalli 57% 17% 7% 19%

Saint Laurent 24% 66% 10%

Completing product range Hermès 22% 56% 12% 10%

Prada Group 16% 82% 1%

Gucci 11% 72% 7% 10%

Richemont 9% 9% 77% 5%

Ferragamo 8% 84% 8%

Tod's 7% 93%

Bottega Veneta 6% 92% 2%

Louis Vuitton 4% 92% 4%

Fashion Leather goods, Shoes & Accessories Watches & Jewellery Other

Source: Company info (FYE 2013), Cerved, BNP Paribas estimates, brokers; Note: Financials as reported; 2012 financials for Roberto Cavalli (1) Other includes fragrances and eyewear (2) Leather
goods includes Watches & Jewellery

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Loro Piana Transaction

In July 2013 LVMH acquires 80% of Loro Piana paying the family €2bn

Total Enterprise Value for Loro Piana €2.7bn

EV/EBITDA Multiple paid = 20x
EV/EBIT paid = 27x

LORO PIANA Sales 2012: €626mln

LP EBITDA: 20%

LVMH EBITDA margin 25%

Is it an accretive transaction?

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Other acquisitions in the luxury sector

AREN’T THESE CRAZY MULTIPLES?

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Accretive or dilutive?

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But don’t forget the hidden synergies

Where is Loro Piana?

And Bulgari?

PLAN BEFORE LORO PIANA ACQUISITION

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What about jewellery?

Bulgari and Pomellato are

in the top 10 of the hottest jewellery brand on Facebook

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Life after acquisitions
Back to be a star?

KERING LVMH

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Most of the times….

[Project name] – [Date] 15

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 But don’t forget the risk of «NEGATIVE SYNERGIES»

In 2011, PPR the French luxury goods group, has confirmed it will acquire Brioni, the Italian high-end men’s
wear group that has dressed Russian prime minister Vladimir Putin and fictional secret agent James Bond in
several film outings.

Following the acquisition the number of shops increased to 84 but keeping the same positioning?

Is it still a made to measure brand?

James Bond Brioni vs Tom Ford Suits

Succesful acquisitions need at least 3 elements to be kept in mind:

• Management focus / time to be dedicated

• Understanding of the brand positioning and history
• Financial resources for the development

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After a period of large acquisitions back to «in house brands development»
2014-2015

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In the past growth was driven by increasing number of stores
2014-2015

[Project name] – [Date] 18

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Today space limit is attained: try to maximise existing retail network

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Not exciting sales growth to cover investments

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A much lower growth was expected on the luxury market: the new normal?

After a stagnating period the luxury market was

expected to grow but at single digit rate

[Project name] – [Date] 21

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A mid-season storm mostly driven by private equity until end of 2019

……but don’t forget trade buyers

Versace’s acquisition by Michael Kors:

€1,8bn Enterprise Value

EV/Sales: 2,5x
EV/EBITDA:22x

LVMH buying Tiffany, for $135 per share,valuing the overall company
at an EV of $16.9bn, corresponding to an EV/sales 2020 of 3.7x and EV/EBIT of 20.4x

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COVID impact

[Project name] – [Date] 23

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Investors looking for growth – the mood is not very exciting….

[Project name] – [Date] 24

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 ….But still very high multiples for Italian companies….a new M&A storm?

Ferruccio Ferragamo - Chairman Miuccia Prada - main shareholder

7 December 2020

Moncler agreed to buy Stone

Island, a rival maker of high-
end sportswear, for 1.15
billion euros ($1.4 billion) in
cash and shares, investing
in a new platform for growth
as the pandemic erodes
demand for luxury.

The deal values Stone Island

at 16.6 times 2020 expected
earnings before interest,
taxes, depreciation and
amortization of 68 million
euros

1 April 2021

Fashion online retailer End

Clothing (sales £170m)
acquired by PE Fund Carlyle 25
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