The luxury industry remains more attractive than ever for investors, as confirmed by Deloitte’s fifth edition of the report “Global Fashion & Luxury Private Equity and Investors Survey 2020”. In 2019, a record 271 M&A was completed, six additional transactions compared to the previous year, a 2% increase.However, it should be noted that 2018 was a more dynamic year with an increase of 47 additional operations compared to 2017.
The first place in the 2019 ranking, as in the previous year, was occupied by transactions executed in the luxury hotel sector, which represent 43% of the total operations. Last year they amounted to 115, with an additional 40 operations compared to 2018.In the luxury goods segment, the number of agreements concluded, however, declined with 53 fewer transactions, including declines from 26 operations in the clothing and accessories sector, 17 in watches and jewelry and 10 in cosmetics and perfumes.
With the coronavirus pandemic, which hit heavily in fashion early this year, and an unstable political environment, investors are witnessing radical changes in the market. But that should not slow down operations, rather the contrary. As most observers have already estimated, the crisis will generate losers and winners, so one can inevitably expect a resumption of acquisitions and mergers in the next two years.
According to Deloitte’s forecasts, after a decline in 2020, the luxury market is expected to grow by 2% to 2.5% per year in five years. This increase should reach 10% between 2019 and 2025 for sales of luxury personal property at a 1.9% positive annual rate. The other luxury segments will be penalized more in the short term, but their sales should increase by 20% over the same period, with annual growth of 2.4%.
“Even in this difficult year, the luxury industry remains fertile ground for investors. After COVID-19, 70 % of the funds will continue to invest in the luxury market, particularly in the clothing and accessories, cosmetics and perfumes and digital luxury sectors.”“It is in the latter, in particular, that good investment opportunities will be focused in 2020, while the classic store will evolve from point of sale to point of contact, confirming the importance of online sales to the world of private capital.” Elio Milantoni, partner of Deloitte, said in a press release.
More in detail, the category of clothing and accessories gained 28 points from the perspective of investor interest; cosmetics and perfumes, 15 points, and digital luxury, 53 points, while the furniture lost 17 points.
However, according to estimates compiled by Deloitte,“over the next three years, investors anticipate a significant impact due to covid-19, especially in the automotive, hotel, restaurant, cruise and retail industries. Sales of clothing, watches and jewelry, yachts and private jets will remain stable, while cosmetics and perfumes and furniture should record sales increases, and digital luxury, a leap.”
Total Transactions Completed in 2019 – Deloitte In fact, the pandemic will accelerate the adoption of innovative technologies. “Luxury companies are looking for new digital companies and start-ups to exploit potential synergies. Digital penetration will also lead to physical revolutions,” stressed audit and consulting firm.
Nearly 57% of financial operators surveyed plan to “invest in disruptive technologies by 2020.” “The internet of things, massive data and analysis and artificial intelligence will have the greatest impact on investors’ portfolios this year,” the interviewees said for this study.
Finally, from a geographical perspective, “investors expect markets in Asia and the Middle East to recover more quickly from the negative impact of Covid-19, with growth in the fashion and luxury sector. Instead, Europe and Latin America are expected to suffer more, with falls in the coming years,” the report says.
Source: Fashion Network