Golden Goose: The Strategy Of A Successful Fashion Company And Its Latest Acquisition
Golden Goose is an Italian luxury fashion brand that sells handmade leather sneakers, footwear, ready-to-wear, and accessories, all characterized by a vintage feel and the company's Star logo. Venice-based Golden Goose retails its products worldwide through a network of exclusive multi-brand stores and franchises, along with single-brand stores. It all started from a workshop near Venice, where Golden Goose was founded in 2000 by two stylists, Francesca Rinaldo and Alessandro Gallo, who began their adventure in collaboration with a Venetian tailor and close friendwho helped by making tailor-made samples. The small Venetian shoemaker has now grown to a multimillion eurocash cowwith yearly revenues of €277mln and an EBITDA margin of over 36% as of the end of 2021. The brand is looking to use its money to acquire one of its main suppliers, Italian Fashion Team, with the aim of gaining further control over their supply chain.
Over a decade of M&A In 2010, withlifetime sales of €30mln through a worldwide network of high-end retailers, the company was bought by Style Capital Group. With 600 showrooms, 7 mono-brand flagship stores, and several corner shops all over the world, Golden Goose was already distributed globally. However, with the support of the acquirers, the brand reached even greater success, more than tripling its yearly revenues reaching €48mln in 2014 and exceeding€75mln in sales by 2015.
This incredible growth whetted the appetite of bigger players - "Golden Goose is already an amazing success story that we believe can be replicated on a larger scale going forward," said Emanuele Lembo, managing partner of Ergon Capital Advisors Italy. In May 2015,75%of the company was acquired by a pool of investors led by Ergon Capital, in a deal understood to be worth more than €100mln.The remaining 25%remained in the hands of brand founders Alessandro Gallo and Francesca Rinaldo, as well as DGPA CEO Roberta Benaglia, who was also president of Golden Goose. The latter will continue as CEO of the brand.
After 16 years of growing a sizable presence and investment from two local private equity funds in Italy, Golden Goose needed a partner to accelerate the brand's global footprint and reimagine its digital capabilities to expand the brand worldwide. Although the company already had a strong domestic base and had generated more than €100mln in revenue in 2016, there was a fantastic opportunity to further expand the business in the United States and China. To launch it, Golden Goose needed a trusted partner who could establish the company as one of the fastestgrowing and most distinctive global luxury lifestyle brands, while keeping intact the emphasis on quality craftsmanshipassimilated with the "Made in Italy"mark.Carlyle Group partnered with Golden Goose bringing its decades of experience in working with luxury consumer brands, global network, deep operational experience, and understanding of the technological innovations that were changing the luxury fashion landscape, acquiring 100% of the brand in March 2017. Carlyle’s contribution in terms of both capital injection and skills for the creation of a corporate management culture were key to Golden Goose’s success. Indeed, in just three years, Golden Goose's EBITDA had grown from €32mln in 2016 to €83mln in 2019, a compound annual growth rate of 37%. The company grew rapidly from seven directly operated stores to nearly 100 stores, with direct-to-consumer sales increasing from about 10% to 45% over the same period.
Carlyle Group announced they were “delighted to pass the baton to Permira” in a deal to sell the Italian luxury sneaker brand for €1.28bln, who will continue to contribute to the company’s exceptional growth and the creation of a market-leading omnichannel platform.
Golden Goose’s First Acquisition On the 4th of October of this year, aftermore than adecade of being the target of acquisitions by private equity firms all around the world, Golden Goose finally decided to make a purchase of its own announcingthe acquisition of one of its major suppliers, Italian Fashion Team (IFT). The deal should be closed by the end of 2022.
Italian FashionTeam Overview IFT is a fashion company, based in Apulia, specialized in the design and manufacturing of high-quality footwear. The company is quite young: it was born in 2006, initiallyproviding fashion consultancy only, starting its new manufacturing business model by 2016, reachingmore than 200 employees and €36.5mln in revenues by the end of 2021. Michele Zonno, the CEO, announced that “it is a pleasure to become part of the Golden Family,” as a culmination of a collaborative partnership that began from the very foundation of IFT. He stressed that the key synergies of the transaction could be summed up in the “commitment for Italian excellence and local talent,”- both essential valuesfound at the coreofthe two companies.
Financial Analysis The deal is not closed yet, and most financial values are undisclosed. However, looking at its balance sheets, we can say that Italian Fashion Team’s numbers are solid. As shown by the graph below, the company delivered a 37.3% CAGR since it first undertook the manufacturing business model, with a positive trendline even during the Covid Crisis, when the fashion industry was hit hard. Its EBITDA margin is also strong, standing at around 18% in 2021, higher than the average of the industry by circa 5 percentage points.
Source: Aida, a Moody's Company
Strategic side of the deal From a strategic point of view, this transaction is a perfect example of upstream vertical integration, a trend that is becoming increasingly common in the fashion industry.
Silvio Campara, CEO of Golden Goose, explained the strategy behind the deal: “Golden artisanal tradition lies in the warmth of a hand-crafted item. Every one of our products tells a unique story – a story of artistry and Italian excellence that starts with our processes and people. As we continue our journey of growth, we want partners who share our values of care, authenticity, and quality to join us.” Indeed, the shoe company based in Veneto has always put stress over the “Made in Italy”mark and the artisanship of each product. A company such as Italian Fashion Team has the perfectly fitting qualitiesfor Golden Goose.
The Venetian brand started manufacturing its own productsin Venice, butoutsourcing was promptly required, as soon as its dimensions increased. Thus, the company looked for small-sized Italian manufacturers and IFT soon became its largest supplier.This acquisition allows Golden Goose both to have direct control on the shoe quality and to reduce its operating costs, internalizing a wider slice of its production. Moreover, Golden Goose took away from competitors an important supplier: the Venetian brand was IFT’s biggest client, but not the only one.
Although this is the first acquisition made by Golden Goose,it is likely that we will see more transactions in the future. Having increased its upstream integration it is possible that the brand will aim to expand downstream, to the sale of its products. Indeed, Golden Goose has always preferred to sell its products through multi-brand stores rather than in directly operated stores, however, there are only 15 of the latter all over Italy, so this could be the next step.
Another viable way of expansion might well be horizontal integration throughthe acquisition of other small Italian luxury brands to increase its market share. However, for any new operation we must wait until its financial firepower is restored.
Vertical Integrations as a Pattern in the Industry During the last decade, upstream acquisitions were a common phenomenon in the luxury fashion industry. LVMH acquired Singaporean Heng Long in 2011, which specialized in the fabrication and processing of leather. Italian suit fabricant Zegna, who went public on NYSE last year, bought an Australian farm that produces very luxury merino wool in 2016. Chanel, a French luxury fashion house, bought four different silk suppliers based in France and a Spanish leather producer in 2018. There are numerous cases where we saw this sort of upstream integration in the fashion industry.
One of the primary reasons why companies look for vertical integration along their supply chain is to gain more control, either over a supplier or a distribution activity. If the process is executed well, this can lead to lower costs, through economies of scale. Another argument that is surely raised in the fashion industry is that such integration will lead to higher control of the raw materials and thereby can further assure the quality of their luxury products.
On the other hand, companies often underestimate the effort, cost, and time necessary to successfully integrate companies into each other. In addition, as companies become larger, management loses flexibility to change supply type or quantity.
A study (Arcuri & Giolli, 2022) suggests that another key driver for vertical integrations is the demand for more sustainable products from customers.Since customers are aware that one backward integration cannot fundamentally change the environmental footprint of a company, firms in the fashion industry incorporate a long-term sustainability strategy. They maximise monetisation of this strategy by expressing it clearly in their mission statement and make strong commitments to it in their marketing approach. Golden Goose is no exception to this development. Having a look in the online shop, they have a separate categoryoffering three different “sustainable” shoes. In addition, they incorporated the sustainable message in their website and made a long and detailed sustainability report for their customers. Gaining further control over the famously precarious supply of sustainable raw materials was not the rationale behind Golden Gooses’ acquisition of IFT, but will necessarily be a driver behind future acquisitions, especially outside of Europe.
Conclusion We believe Golden Goose has proven to be a solid company. Its revenuesincreased at an exceptional rate, with an unconventional artistry which left a mark on fashion. By completing the acquisition of Italian Fashion Team, the company is making a decisive move for its strategy, gaining even more quality control on its products, and reducing its operating costs through production internalization. Everything seems to suggestthat the deal is going tobe a remarkable success for the Venetian shoemaker, but the combination of a tumultuous geopolitical environment with the variability of the fashion industry makes it so that only time will tell.
By Anna Rosaria Manni, Cosimo Winchler, and Leopold Plattner
Sources Permira Funds Ergon Capital Partners Carlyle Group Global Insights This Marketer's Life Aida, a Moody's Company La Conceria PambianCONews Hubstyle Sport Press LegalCommunity.it just-style.com IlSole24Ore Springer Deloitte
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