The luxury industry has been undergoing a long-lasting wave of consolidation as major fashion houses look to strengthen their portfolio offerings while expanding global influence. The latest initiative came from Prada’s potential acquisition of Versace, currently owned by Capri Holdings, for an estimated $1.6 billion. In this article we aim to explore the recent trends impacting the luxury apparel market, analyze the potential deal between Prada and Versace and shed light on how it will affect the performance of the two luxury groups in the near future.
Industry Overview
Although the luxury apparel industry is currently facing some challenges, it is emerging from a five-year period of remarkable value creation. From 2019 to 2023, despite the Covid-19 crisis, the market experienced unprecedented demand for personal luxury goods, such as fashion, watches, and jewelry. This push allowed the sector to achieve an annual compound growth rate of 5%, driven by price increases, which accounted for 80% of the growth in revenues, and large inventories. Luxury brands exceeded global market performance, reaching unprecedented profitability levels. However, conditions deteriorated in the year 2024, and for the first time since 2008 (excluding the Covid-19 period), growth was lower than the previous year’s result for the sector. The personal luxury goods market dropped by 2% with respect to 2023 from $387 billion to $381 billion. This can be attributed to shifting economic conditions and macroeconomic uncertainty, causing consumers to be more cautious about their spending. This is especially true for the Chinese market, which is key in fueling the demand for personal luxury goods. In 2024, the Chinese luxury goods market experienced a significant decline of 18-20%. This drop was due to lower consumer confidence and increased overseas spending, impacting the majority of brands. This trend is expected to remain in 2025, with demand remaining flat and a challenging first half, followed by improvement in the second half driven by the positive effects of China's economic stimulus measures. However, despite investor optimism, the stimulus package alone may not be sufficient to revive Chinese customer demand. Recent developments also indicate that price increases have reached a ceiling. From 2020 to 2023, brands like Chanel and Dior increased their price by more than 66% on average. Although initially a driver of growth, brands are now facing resistance from consumers leading to a lower demand from aspirational luxury consumers, and growth through inflated prices is no longer sustainable. Consequently, in addition to stalling price increases, luxury houses are now shifting to increasing their catalogue of more affordable items, which in turn is leading to lower average selling price.
Despite this recent trend, fashion M&A activity is picking up after a period of stagnation and several transactions took place in the beginning of 2025. Namely, the acquisition of True Religion by the PE firm Acon Investments, the brand Christion Lacroix was acquired by the Spanish manufacturer Sociedad Textil Lonia, and Bonpoint, a children’s luxury apparel brand, was sold to the Chinese Youngor Group. This uptick in activity can be attributed to several factors including the reelection of Donald Trump, which can be seen as favourable for business, and strong holiday sales in the US, which boosted investor confidence in customer demand. Another factor which may influence investor sentiment could be the departure of Lina Khan from the Federal Trade Commission (FTC), which was responsible for the objection of the acquisition of Capri Holdings by Tapestry Inc back in October 2024.
Looking ahead, we can expect the personal luxury goods market to experience moderate growth in 2025, with a forecasted increase of 0.5% to 4%. This growth will be driven by sustained demand in Western countries, the Middle East, and a gradual recovery of the demand coming from China. Whilst pressures from consumers opting for more affordable alternatives and increased competition remain, the sector continues to be highly profitable. In the future, profit margins are likely to decline slightly, from 21% in 2021-2022 down to 18-19% in 2025. As we move forward towards 2030, the market is set to grow at a steady rate of 4% to 6% annually, reaching a value of €460 billion to €500 billion. In order to unlock this potential, luxury brands will need to focus on delivering high-quality products, building deeper consumer relationships, and embracing new technologies like generative AI to drive innovation and secure long-term growth in the market. Understanding the luxury industry dynamics and future trends has an essential role in paving the way towards an in-depth analysis of the Prada-Versace deal, as it provides the context in which the potential future group will have to operate.
The Buyer: Prada
Prada was founded in 1913 by Mario Prada in Milan as a luxury leather goods shop. It cemented its place as a prestigious brand when, in 1919, it was awarded the title of “Official Supplier to the Italian Royal Household” by the House of Savoy, Italy's ruling royal family at the time. It maintained its reputation of luxury fashion until 1978 where Miuccia Prada, Mario Prada's granddaughter, introduced a more minimalist and avant-garde approach to fashion, referring to bold and experimental designs and attempting to push the boundaries of traditional clothing. The first major success of this change in approach came in 1984 with the Black Nylon Bag, which revolutionized fashion. Prada began expanding into other segments of fashion, with projects such as Miu Miu, Linea Rossa and Church's shoes being some of the highlights. In an attempt to attract investment, specifically from the untapped Asian Market, Prada was listed on the Hong Kong Stock Exchange (HKEX) in 2011, raising $2.1 billion and becoming one of the few luxury fashion brands to be publicly traded.
The core brand of Prada focuses on high-fashion ready-to-wear handbags, footwear, and accessories, still maintaining the minimalist but elegant approach implemented by Miuccia Prada. The first major separate brand was Miu Miu, which was founded in 1993 with its playful and rebellious style appealing more to younger and trendier generations. This was followed by the acquisition of Church's in 1999, a high-end British leather shoes producer. These gave Prada a greater hold on the traditional and casual footwear industries. It also has other spin offs such as Prada Eyewear and Prada fragrances, licensed to Luxottica and L'Oreal respectively.
The Buyer: Prada
Prada was founded in 1913 by Mario Prada in Milan as a luxury leather goods shop. It cemented its place as a prestigious brand when, in 1919, it was awarded the title of “Official Supplier to the Italian Royal Household” by the House of Savoy, Italy's ruling royal family at the time. It maintained its reputation of luxury fashion until 1978 where Miuccia Prada, Mario Prada's granddaughter, introduced a more minimalist and avant-garde approach to fashion, referring to bold and experimental designs and attempting to push the boundaries of traditional clothing. The first major success of this change in approach came in 1984 with the Black Nylon Bag, which revolutionized fashion. Prada began expanding into other segments of fashion, with projects such as Miu Miu, Linea Rossa and Church's shoes being some of the highlights. In an attempt to attract investment, specifically from the untapped Asian Market, Prada was listed on the Hong Kong Stock Exchange (HKEX) in 2011, raising $2.1 billion and becoming one of the few luxury fashion brands to be publicly traded.
The core brand of Prada focuses on high-fashion ready-to-wear handbags, footwear, and accessories, still maintaining the minimalist but elegant approach implemented by Miuccia Prada. The first major separate brand was Miu Miu, which was founded in 1993 with its playful and rebellious style appealing more to younger and trendier generations. This was followed by the acquisition of Church's in 1999, a high-end British leather shoes producer. These gave Prada a greater hold on the traditional and casual footwear industries. It also has other spin offs such as Prada Eyewear and Prada fragrances, licensed to Luxottica and L'Oreal respectively.
The Target: Versace
Versace is a much younger brand, being launched in 1978 by Gianni Versace in Milan. Versace made waves in the fashion world, pioneering the supermodel era of the early 1990s, and setting culture defining trends such as Elizabeth Hurley's iconic black safety pin dress. However, tragedy struck in 1997 when Gianni Versace was assassinated in Miami. He was succeeded by his sister Donatella Versace, who took over as creative director. Versace broke ground in 2011 with its Versace x H&M collaboration becoming a first of its kind. It was so highly anticipated that the collection sold out within hours. Versace was eventually wholly acquired in 2018 by Capri Holdings for €1.83 billion, helping Versace expand into the U.S. market.
Unlike Prada, Versace maintains its name on all sub-brands it has. Its core brand focuses on high-fashion ready-to-wear handbags, accessories, and footwear, with its iconic Medusa Logo being a staple of the brand. Like Prada, Versace has engaged in multiple licensing deals with Luxottica for eyewear, Euroitalia for fragrances, and Timex group for watches and jewelry. In addition to fashion and clothing, Versace has expanded operations into the home and real estate market. It offers a unique interior design catalogue consisting of Baroque-style furniture, gold accented home décor and silk bedding, all found in its hotel chain under the Palazzo Versace brand.
The Target: Versace
Versace is a much younger brand, being launched in 1978 by Gianni Versace in Milan. Versace made waves in the fashion world, pioneering the supermodel era of the early 1990s, and setting culture defining trends such as Elizabeth Hurley's iconic black safety pin dress. However, tragedy struck in 1997 when Gianni Versace was assassinated in Miami. He was succeeded by his sister Donatella Versace, who took over as creative director. Versace broke ground in 2011 with its Versace x H&M collaboration becoming a first of its kind. It was so highly anticipated that the collection sold out within hours. Versace was eventually wholly acquired in 2018 by Capri Holdings for €1.83 billion, helping Versace expand into the U.S. market.
Unlike Prada, Versace maintains its name on all sub-brands it has. Its core brand focuses on high-fashion ready-to-wear handbags, accessories, and footwear, with its iconic Medusa Logo being a staple of the brand. Like Prada, Versace has engaged in multiple licensing deals with Luxottica for eyewear, Euroitalia for fragrances, and Timex group for watches and jewelry. In addition to fashion and clothing, Versace has expanded operations into the home and real estate market. It offers a unique interior design catalogue consisting of Baroque-style furniture, gold accented home décor and silk bedding, all found in its hotel chain under the Palazzo Versace brand.
Focus on Versace’s recent financial performance
Since Capri Holdings acquired Versace in 2018 for €1.83 billion, Versace's revenues peaked in 2023 with $1.1 billion but has since seen a decline in revenues to $1 billion in 2024, with EBIT that declined from $152million to $25million during the same period. There are many reasons for Versace's recent struggles, which led to its poor financial performance and severe fall in revenue and profitability over the past year. One reason can be attributed to Versace's recent shift away from its 'statement pieces' in favor of leaning into quiet luxury. Capri Holding's CEO has since admitted this decision "removed too many unique Versace items," reducing the appeal of wearing Versace to the flashy and extravagant consumer, the ones who tend to have the largest pockets for fashion. Popularity with Versace has declined with newer generations, firstly because the brand focuses on high-end craftmanship to prioritize luxury, but neglects its ecofootprint, a decision which hasn't sat well with a more environmentally aware generation. Secondly, Versace has been recently eliminating lower-priced items, preventing newer generations from getting a foot in the door of Versace products and eventually building up to purchasing more expensive items. This has led to Versace losing ground to rivals such as Jacquemus or Balenciaga. Furthermore, Versace’s parent company Capri Holdings has taken on a lot of debt recently, culminating to $1.5 billion in the last fiscal year ending in March 2024, causing potential investors and shareholders to question the financial health of the company.
Focus on Versace’s recent financial performance
Since Capri Holdings acquired Versace in 2018 for €1.83 billion, Versace's revenues peaked in 2023 with $1.1 billion but has since seen a decline in revenues to $1 billion in 2024, with EBIT that declined from $152million to $25million during the same period. There are many reasons for Versace's recent struggles, which led to its poor financial performance and severe fall in revenue and profitability over the past year. One reason can be attributed to Versace's recent shift away from its 'statement pieces' in favor of leaning into quiet luxury. Capri Holding's CEO has since admitted this decision "removed too many unique Versace items," reducing the appeal of wearing Versace to the flashy and extravagant consumer, the ones who tend to have the largest pockets for fashion. Popularity with Versace has declined with newer generations, firstly because the brand focuses on high-end craftmanship to prioritize luxury, but neglects its ecofootprint, a decision which hasn't sat well with a more environmentally aware generation. Secondly, Versace has been recently eliminating lower-priced items, preventing newer generations from getting a foot in the door of Versace products and eventually building up to purchasing more expensive items. This has led to Versace losing ground to rivals such as Jacquemus or Balenciaga. Furthermore, Versace’s parent company Capri Holdings has taken on a lot of debt recently, culminating to $1.5 billion in the last fiscal year ending in March 2024, causing potential investors and shareholders to question the financial health of the company.
Deal Specifics and Valuation
Prada is set to acquire a 100% stake in Versace in a transaction worth approximately €1.5 billion, which may be extended to include Jimmy Choo, taking the overall estimated deal size to around €2 billion. The terms of payment have not been disclosed yet, and it is not clear whether the deal will be all cash, stock, or a combination of both. That said, comparable deals in the luxury category have mainly been all-cash transactions. However, as of December 2024, Prada had net cash of €600 million, which is significantly lower than the expected deal value. Hence, the firm may have to fund the acquisition further with either debt or stocks. The first option would enable the company to have complete control of Versace but would increase financial leverage and therefore the borrowing cost. The firm can, in turn, opt for a stock-based option, therefore preserving liquidity but possibly leading to dilution of shareholders.
The €1.5billion transaction size for Versace’s acquisition would imply EV/Sales and EV/EBIT multiples of respectively 1.6x and 65.2x, computed based on actual FY24 revenues and EBIT of the target (€950million; €23million).
Trading Comparables
To understand the valuation of Versace, we have selected data from 8 comparable companies active in the luxury market, taking into account their product offering and capital structure (LVMH; Hermès International SCA; Salvatore Ferragamo Spa; Ralph Lauren; Kering SA; Brunello Cuccinelli Spa; Richemont; Estee Lauder). Based on 2024 figures, we have calculated the EV/EBIT actual multiple for Versace’s peers, which allows us to better understand the estimated transaction price, putting it in perspective with respect to similar companies. The choice of using an EBIT multiple rather than an EBITDA multiple, lies in the fact that luxury brands own increasingly more flagship stores, production facilities, and more importantly, highly valuable intangibles, whose D&A needs to be considered when assessing profitability of these companies. From our analysis, the average EV/EBIT for the peers is 22.8x, while the median is 19.0x, implying a valuation range for Versace between €437.0 and €524.4 million. As observed, these values are clearly lower than the one implied by the acquisition price, which is 65.2x. The valuation of €1.5 billion exceeds by far the one obtained with the trading comparables analysis, suggesting that Prada is valuing the Italian brand almost three times what would be considered a fair value in the industry according to peer multiples.
However, several factors could justify the difference of almost €1 billion in valuation between our range and the potential deal price. The first one is that comparable companies analysis does not take into account the synergies that can be achieved by the new entity, which in these type of deals may drive valuation up by several millions. Another reason is to be found in the particularly poor financial performance Versace registered in 2024, during a challenging year for the broad luxury market. Applying our median multiple to the target’s EBIT in FY23 (€140 million) would provide us with an Enterprise Value of €2.6 billion, far higher than the €1.5 billion Prada seems ready to spend on the acquisition. In other words, despite recent struggles and declining revenues, Versace remains a prominent player in this industry. Given their unique brand image and strong international presence, which under the guidance of Prada’s wise management could increase in value in the near future, the premium paid by the buyer could be justified.
Trading Comparables
To understand the valuation of Versace, we have selected data from 8 comparable companies active in the luxury market, taking into account their product offering and capital structure (LVMH; Hermès International SCA; Salvatore Ferragamo Spa; Ralph Lauren; Kering SA; Brunello Cuccinelli Spa; Richemont; Estee Lauder). Based on 2024 figures, we have calculated the EV/EBIT actual multiple for Versace’s peers, which allows us to better understand the estimated transaction price, putting it in perspective with respect to similar companies. The choice of using an EBIT multiple rather than an EBITDA multiple, lies in the fact that luxury brands own increasingly more flagship stores, production facilities, and more importantly, highly valuable intangibles, whose D&A needs to be considered when assessing profitability of these companies. From our analysis, the average EV/EBIT for the peers is 22.8x, while the median is 19.0x, implying a valuation range for Versace between €437.0 and €524.4 million. As observed, these values are clearly lower than the one implied by the acquisition price, which is 65.2x. The valuation of €1.5 billion exceeds by far the one obtained with the trading comparables analysis, suggesting that Prada is valuing the Italian brand almost three times what would be considered a fair value in the industry according to peer multiples.
However, several factors could justify the difference of almost €1 billion in valuation between our range and the potential deal price. The first one is that comparable companies analysis does not take into account the synergies that can be achieved by the new entity, which in these type of deals may drive valuation up by several millions. Another reason is to be found in the particularly poor financial performance Versace registered in 2024, during a challenging year for the broad luxury market. Applying our median multiple to the target’s EBIT in FY23 (€140 million) would provide us with an Enterprise Value of €2.6 billion, far higher than the €1.5 billion Prada seems ready to spend on the acquisition. In other words, despite recent struggles and declining revenues, Versace remains a prominent player in this industry. Given their unique brand image and strong international presence, which under the guidance of Prada’s wise management could increase in value in the near future, the premium paid by the buyer could be justified.
Figure 1: Actual EV/EBIT multiples in the industry (Source: FactSet)
Precedent Transactions
To gain a more comprehensive understanding of Versace’s valuation, it is important to look at multiples implied by past deals in the luxury industry. The increasing M&A activity has given us many similar transactions. In this case we decided to include 6 major deals that took place over the last eight years considering also pre-pandemic ones, in order not to be restricted to the latest market conditions. In our choice, we considered transactions that were intended to exploit large amounts of synergies for the new entities in order for them to be as relevant as possible for our case. Based on our analyses, for the EV/Sales multiple the average is 3.1x, with a slightly greater median of 3.2x, leading to a valuation range of €2.9-€3.0 billion. These figures would imply an undervaluation of Versace, given the transaction size of €1,5 billion. Using a Sales multiple is usually not recommended to value luxury companies as it does not provide enough focus on the actual profitability, but due to the recent market conditions, we thought it could provide interesting insights as revenues tend to be less volatile than operating profits. Surprisingly, looking at the EV/EBIT average and median values from precedent transaction analysis, we come across a range which is lower than the one provided by the trading comparables one. A reason for this might be the fact that many deals involved acquisitions of private companies, which tend to be acquired at lower multiples due to limited transparency, higher governance risks, and lack of liquidity. The average EV/EBIT for past transactions is 18.9x with a median of 19.2x. Given the 65.2x multiple implied by Versace’s potential acquisition price, we can see how the company is probably being overpriced. As explained above in the trading comparable analysis, the premium is likely due to high expected synergies and the poor 2024 performance of Versace.
Precedent Transactions
To gain a more comprehensive understanding of Versace’s valuation, it is important to look at multiples implied by past deals in the luxury industry. The increasing M&A activity has given us many similar transactions. In this case we decided to include 6 major deals that took place over the last eight years considering also pre-pandemic ones, in order not to be restricted to the latest market conditions. In our choice, we considered transactions that were intended to exploit large amounts of synergies for the new entities in order for them to be as relevant as possible for our case. Based on our analyses, for the EV/Sales multiple the average is 3.1x, with a slightly greater median of 3.2x, leading to a valuation range of €2.9-€3.0 billion. These figures would imply an undervaluation of Versace, given the transaction size of €1,5 billion. Using a Sales multiple is usually not recommended to value luxury companies as it does not provide enough focus on the actual profitability, but due to the recent market conditions, we thought it could provide interesting insights as revenues tend to be less volatile than operating profits. Surprisingly, looking at the EV/EBIT average and median values from precedent transaction analysis, we come across a range which is lower than the one provided by the trading comparables one. A reason for this might be the fact that many deals involved acquisitions of private companies, which tend to be acquired at lower multiples due to limited transparency, higher governance risks, and lack of liquidity. The average EV/EBIT for past transactions is 18.9x with a median of 19.2x. Given the 65.2x multiple implied by Versace’s potential acquisition price, we can see how the company is probably being overpriced. As explained above in the trading comparable analysis, the premium is likely due to high expected synergies and the poor 2024 performance of Versace.
Figure 2: EV/Sales and EV/EBIT precedent transactions multiples (Source: MergerMarket)
Deal Rationale and Future Prospects
Looking at the rationale behind the deal, it appears to be beneficial for both Italy’s largest luxury fashion groups: Prada and Versace. Indeed, despite the current luxury slowdown, Prada is outstanding and its financials have remained very strong due to Miu Miu’s rising success. On the other hand, Capri Holdings, the parent company of Versace and other luxury brands such as Michael Kors and Jimmy Choo, has been looking to sell Versace for some time. The Italian brand was facing some troubles: a 15% year-on-year revenue decline was reported, with operating losses widening from $14 to $21 million. The acquisition could therefore be seen as a chance for Versace to deal with its financial difficulties. Moreover, the idea of the deal accelerated last year, when Capri Holdings’ $8.5 billion merger with its rival Tapestry was blocked by the Federal Trade Commission. As for Prada, the deal would bring the Versace brand back under Italian ownership, positioning it as a larger competitor to LVMH and Kering.
From an operational point of view, the deal would enable Prada to diversify and enlarge its geographic scope. Indeed, Versace is characterized by a strong presence in North America and Asia. This would offer Prada the opportunity to amplify its presence in these crucial strategic markets. Moreover, the integration would allow Prada to extend its offer, acquiring a brand portfolio with a completely distinctive and complementary style, reinforcing its presence in different segments of the luxury market. Indeed, Versace's bold maximalism style strictly contracts with Prada’s sober elegant and minimalist aesthetic, potentially adding something different to the Milan-based group.
Furthermore, the deal would lead to several synergies. Concerning the costs, the integration of two companies from the same industry allows them to benefit from economies of scale, fixed cost absorption, as well as economies of scope. Complementarities in production, go-to-market operations, and product distribution would also enhance efficiency. For example, pooling distribution networks and logistics platforms could help reduce operating costs. On the other hand, in addition to diminishing costs, the deal would lead to revenue synergies. The acquisition would allow the leverage of marketing and consumer insights by sharing data. Additionally, combining design and innovation expertise of the two brands could lead to attractive new collections for a broader customer base.
Finally, the deal would allow both brands to leverage their complementarity by targeting different consumer groups and communities. Moreover, group synergies increase negotiation power when it comes to negotiating with landlords, wholesalers, and suppliers, such as media agencies. A strategy employed by competitors such as LVMH. The deal would allow both brands to take advantage of the other’s brand reputation and corporate image, and gain credibility facing the unique brand recognition of its competitors.
Hence, the greatest strength of the acquisition would be the product-market diversification caused by the integration, allowing the firm to combine their distinct style identity and geographic scope. A challenge could be integrating different corporate company cultures. Indeed, Prada and Versace had already held merger discussions at the end of the 90s. But it was concluded that the “clash between the great personalities” had derailed those discussions. Other weaknesses could also be the dilution of the brands’ identity, if the distinction between them is not maintained, or the complexity of the future entity’s organization. Indeed, merging two firms raises critical questions about coordination.
The major risk of this new entity remains the increasing competition from other major luxury groups. In addition, the merger could lead to an increase in prices, and therefore a potential loss of customers. Another important risk to consider is the threat of the antitrust law, which could potentially block the deal if it is determined that the merger would result in reduced competition or market dominance, as it was the case when Tapestry Inc attempted to acquire Capri Holdings.
Deal Rationale and Future Prospects
Looking at the rationale behind the deal, it appears to be beneficial for both Italy’s largest luxury fashion groups: Prada and Versace. Indeed, despite the current luxury slowdown, Prada is outstanding and its financials have remained very strong due to Miu Miu’s rising success. On the other hand, Capri Holdings, the parent company of Versace and other luxury brands such as Michael Kors and Jimmy Choo, has been looking to sell Versace for some time. The Italian brand was facing some troubles: a 15% year-on-year revenue decline was reported, with operating losses widening from $14 to $21 million. The acquisition could therefore be seen as a chance for Versace to deal with its financial difficulties. Moreover, the idea of the deal accelerated last year, when Capri Holdings’ $8.5 billion merger with its rival Tapestry was blocked by the Federal Trade Commission. As for Prada, the deal would bring the Versace brand back under Italian ownership, positioning it as a larger competitor to LVMH and Kering.
From an operational point of view, the deal would enable Prada to diversify and enlarge its geographic scope. Indeed, Versace is characterized by a strong presence in North America and Asia. This would offer Prada the opportunity to amplify its presence in these crucial strategic markets. Moreover, the integration would allow Prada to extend its offer, acquiring a brand portfolio with a completely distinctive and complementary style, reinforcing its presence in different segments of the luxury market. Indeed, Versace's bold maximalism style strictly contracts with Prada’s sober elegant and minimalist aesthetic, potentially adding something different to the Milan-based group.
Furthermore, the deal would lead to several synergies. Concerning the costs, the integration of two companies from the same industry allows them to benefit from economies of scale, fixed cost absorption, as well as economies of scope. Complementarities in production, go-to-market operations, and product distribution would also enhance efficiency. For example, pooling distribution networks and logistics platforms could help reduce operating costs. On the other hand, in addition to diminishing costs, the deal would lead to revenue synergies. The acquisition would allow the leverage of marketing and consumer insights by sharing data. Additionally, combining design and innovation expertise of the two brands could lead to attractive new collections for a broader customer base.
Finally, the deal would allow both brands to leverage their complementarity by targeting different consumer groups and communities. Moreover, group synergies increase negotiation power when it comes to negotiating with landlords, wholesalers, and suppliers, such as media agencies. A strategy employed by competitors such as LVMH. The deal would allow both brands to take advantage of the other’s brand reputation and corporate image, and gain credibility facing the unique brand recognition of its competitors.
Hence, the greatest strength of the acquisition would be the product-market diversification caused by the integration, allowing the firm to combine their distinct style identity and geographic scope. A challenge could be integrating different corporate company cultures. Indeed, Prada and Versace had already held merger discussions at the end of the 90s. But it was concluded that the “clash between the great personalities” had derailed those discussions. Other weaknesses could also be the dilution of the brands’ identity, if the distinction between them is not maintained, or the complexity of the future entity’s organization. Indeed, merging two firms raises critical questions about coordination.
The major risk of this new entity remains the increasing competition from other major luxury groups. In addition, the merger could lead to an increase in prices, and therefore a potential loss of customers. Another important risk to consider is the threat of the antitrust law, which could potentially block the deal if it is determined that the merger would result in reduced competition or market dominance, as it was the case when Tapestry Inc attempted to acquire Capri Holdings.
Conclusion
The future performance of a potential Prada-Versace entity will depend on several key trends shaping the luxury industry as mentioned above. Despite the challenges, the global luxury market is projected to continue to grow. The sector has shown resilience facing economic fluctuations, with sustained growth fueled by demand in Asia and North America. China, South Korea, and the broader Southeast Asia region remain critical growth markets for luxury. Given Versace’s strong presence in these markets, the deal would therefore expand Prada’s brand portfolio and strengthen its presence in Asia. The U.S. on the other hand has remained an increasingly important market for luxury, with American consumers among the top spenders on high-end fashion. Versace’s established footprint in the U.S. could help Prada boost its share in North America.
In 2024, Prada generated approximately €5.4 billion in sales, whilst Versace reported around €1 billion. Together, their combined revenue could exceed €6.4 billion. This would strengthen Prada’s position as a new entity, enabling it to compete more closely with groups such as Hermes (€15 billion), although still lagging behind others such as Kering (€17.2 billion) and LVMH (over €40 billion for the fashion and leather goods division). It would not immediately threaten LVMH, whose size and diversification remain unrivalled, but it could quickly attain Kering's level in terms of sales and global reach.
Therefore, despite the high valuation with respect to its peers, the acquisition of Versace could be a turning point for Prada, allowing it to elevate itself to a new level, becoming Italy's largest luxury group and establishing itself as a serious competitor to the French giants in the sector.
Conclusion
The future performance of a potential Prada-Versace entity will depend on several key trends shaping the luxury industry as mentioned above. Despite the challenges, the global luxury market is projected to continue to grow. The sector has shown resilience facing economic fluctuations, with sustained growth fueled by demand in Asia and North America. China, South Korea, and the broader Southeast Asia region remain critical growth markets for luxury. Given Versace’s strong presence in these markets, the deal would therefore expand Prada’s brand portfolio and strengthen its presence in Asia. The U.S. on the other hand has remained an increasingly important market for luxury, with American consumers among the top spenders on high-end fashion. Versace’s established footprint in the U.S. could help Prada boost its share in North America.
In 2024, Prada generated approximately €5.4 billion in sales, whilst Versace reported around €1 billion. Together, their combined revenue could exceed €6.4 billion. This would strengthen Prada’s position as a new entity, enabling it to compete more closely with groups such as Hermes (€15 billion), although still lagging behind others such as Kering (€17.2 billion) and LVMH (over €40 billion for the fashion and leather goods division). It would not immediately threaten LVMH, whose size and diversification remain unrivalled, but it could quickly attain Kering's level in terms of sales and global reach.
Therefore, despite the high valuation with respect to its peers, the acquisition of Versace could be a turning point for Prada, allowing it to elevate itself to a new level, becoming Italy's largest luxury group and establishing itself as a serious competitor to the French giants in the sector.
By Alex Murray-Bruce, Pietro Nicolazzi, Annaelle Pater and Lilas Spitzer
SOURCES
- Forbes
- Financial Times
- Bain
- McKinsey
- Reuters
- Capri Holdings Annual Reports
- FactSet
- MergerMarket
- Prada Group Annual Reports