Fashion & Luxury Private Equity and Investors Survey 2018

Investors are optimistic. The global market will grow by 5-10% per year until 2021.

Growing political tensions worldwide, tax reforms, new trade policies, continuous digitization, and the increasingly widespread presence of disruptive technologies are profoundly influencing the luxury sector’s business models. The global investors interested in the Fashion & Luxury industry are reviewing their expectations and future strategies, as highlighted by Deloitte’s Global Fashion & Luxury Private Equity and Investors Survey 2018. The survey, developed by the member firms of Deloitte’s Europe, Middle East and Africa region (EMEA), analyses the luxury market’s trends as well as expectations of M&A activities in the sector.

"Our study, demonstrates how, despite serious challenges, the luxury industry continues to be fertile soil for investors," explains Elio Milantoni, Deloitte Financial Advisory - Fashion & Luxury Leader. "In 2017, two sectors showed a significant increase in the volume of M&A transactions: Apparel & Accessories and Cosmetics & Fragrances. Both have increased their performance, becoming the most interesting sectors for investors in 2018. Higher profitability corresponds to a greater number of deals.”

Key findings from the report

• Apparel & Accessories is the most dynamic sector with 36% of the M&A transactions among Luxury Goods companies; 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.
• Financial investors completed more transactions than in 2016; while transactions completed by strategic investors declined by 13% from 2016.
• 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.

“Virtualization trends in the consumer purchasing process are leading to a creation of a new cluster of firms focusing on Digital Luxury, mainly occurring in the Apparel & Accessories sector,” explained Tommaso Nastasi – Deloitte Financial Advisory Partner. “While current investors, mainly located in the EMEA area, are more attracted to innovative segments like Digital Luxury, newcomers prefer consolidated sectors within the Fashion & Luxury industry where market knowledge is widespread. With respect to 2017, the continuous consolidation of the Fashion & Luxury industry is moving investments towards smaller-sized companies (+10 percentage points), where investors plan to boost performance by implementing internationalization, performance improvement and change management strategies. Investors seem to pay particular attention to digital: 63% of them will invest in disruptive technologies to leverage potential synergies. The Internet of Things and artificial intelligence are the drivers that will have the greatest impact on investors' portfolios.”