Behind the surge in luxury deals in Italy: is a conglomerate next?
Zegna, with its heritage, know-how, progress in sustainability and track record in brand development, as well as tracking its own growth plans, is well placed, believes Bonomi. The private equity firm was also impressed with the acquisition by Zegna and the successful management of Thom Browne, which demonstrated the strength of the group’s M&A strategy and ability to build brands, he said. The deal has been ongoing since January. “Zegna immediately opened its doors and saw it as a great idea,” he says.
The growth of the Zegna group will take various forms. The group sees it as an opportunity to increase its digital presence and consolidate its reputation as a luxury brand, he said. Focusing on textiles and specialist Italian skills will also be essential. This is why Ermenegildo Zegna and Prada acquired a majority stake in Italian cashmere producer Filati Biagioli Modesto last month, Zegna said. Although financial details of the deal were not disclosed, the deal shows Prada and Zegna now each own 40% of the cashmere company.
“Mesh will be the next booming sector in the luxury industry. It is an essential textile and a great opportunity, ”says Zegna. The group plans to continue its investments in this area if they are realized, but “this must correspond to our culture and must be integrated within our structure”, he says. “Right now we don’t have anything, but we have a lot of paper and stone on our table, and every time we decide to go ahead, it has to be another Thom Browne.”
Luxury M&A and the future of consolidation
Today, it is more of a sellers ‘market than a buyers’ market, observes Rambourg. From a buyer’s perspective, however, it makes sense to diversify assets or fill a gap in their business. He mentions LVMH’s agreement with Tiffany, which has benefited both companies. Buyers also benefit from favorable rates that have “rarely been so low,” he adds. “When you negotiate debt to buy assets, it’s very cheap in the United States and parts of Europe.” This makes all the more sense given that most buyers don’t think of the immediate few years but of the next generation, he says. “The question of paying a high multiple becomes relative if you have a 15-20 year vision, versus if you only commit for the next six months.
De Benedetti of Carlyle Group agrees: “If you look at listed companies and their valuations, they are at an all time high. I would say it is more of a sellers market in the sense that there is a lot of capital for very few transactions. It is also difficult to find a target. The reality is that for two years nothing happened, so you have a bit of pent-up demand. “