With the announcement of the acquisition of Versace by Michael Kors, comes an end to the independence of one of the most famous Italian fashion houses. Looking at the Italian fashion landscape, Versace is definitely not the first of its kind to be acquired by an international corporation. This article will provide an overview of the history of M&A regarding Italian high fashion houses and look at what might be some of the driving factors behind these acquisitions.
VERSACE
To start, let’s look at the history of the company most recently to be acquired, Versace. The company was founded in 1978 by Gianni Versace. Versace became known worldwide during the 80’s for its original flamboyant designs and dressing many famous clients such as Elton John and Michael Jackson. The murder of Gianni Versace in 1997 was a big shock to the fashion world. His sister Donatella Versace took on the role of Chief Designer and his brother Santo Versace took on the role of CEO. They were able to continue creating well received collections. In 2014 the Blackstone group acquired a 20% stake in the company and implemented an expansion strategy which had significant success in 2015 but since then growth has been quite disappointing as can be seen from the graph below. In September 2018 it was announced that Michael Kors would acquire Versace for an EV of €1.83bn.
VERSACE
To start, let’s look at the history of the company most recently to be acquired, Versace. The company was founded in 1978 by Gianni Versace. Versace became known worldwide during the 80’s for its original flamboyant designs and dressing many famous clients such as Elton John and Michael Jackson. The murder of Gianni Versace in 1997 was a big shock to the fashion world. His sister Donatella Versace took on the role of Chief Designer and his brother Santo Versace took on the role of CEO. They were able to continue creating well received collections. In 2014 the Blackstone group acquired a 20% stake in the company and implemented an expansion strategy which had significant success in 2015 but since then growth has been quite disappointing as can be seen from the graph below. In September 2018 it was announced that Michael Kors would acquire Versace for an EV of €1.83bn.
Looking at how this story compares to a range of Italian high fashion houses, it seems that they can mostly be separated into two groups; young and independent fashion houses and those that have been around for a long time and are no longer under control of the original founders. First let’s look at some of the acquired Italian fashion houses.
VALENTINO
Originally founded in 1960 by Valentino Garavani, Valentino has not been in the hands of the founding family since 1998, although Valentino Garavani was involved in the design of the clothing until 2008. Back in 1998 the family sold the company to an Italian conglomerate and it has since changed hands multiple times. The company has spent several years under ownership of private equity fund Permira, with the last transaction taking place in 2012 when the company was acquired by a Qatari investment group. It stands out that Valentino, although it has already been out of the hands of the original family for a long time, it is not part of a larger luxury brand group and still independent.
FENDI
Fendi was founded in 1925 by Adele and Edoardo Fendi. The company remained family owned for considerable time, being famously run by the second generation “five Fendi sisters” until they sold a 51% stake in the company to LVMH and Prada in 1999. LVMH bought Prada’s stake in 2001 and has over time fully absorbed Fendi into the LVMH group.
GUCCI
The history of Gucci goes back all the way to 1920 when the company was founded by Guccio Gucci alongside his three sons. The company prospered, especially after the second world war and had its peak years during the 1970’s. Things took a turn for the worse in a period of family disputes when Maurizio Gucci took over the management of the company in 1983 after his father, one of the three sons, passed away. Maurizio did not manage to successfully run the company and ended selling the company to a Bahrain investment firm in 1988. Under private ownership the company went on a considerable acquisition spree, buying amongst others Yves Saint Laurent, Bottega Veneta and Balenciaga. The company went public in 1996 shortly after which it found itself target of an acquisition attempt by LVMH. In the end it was not LVMH but Pinault-Printemps-Redoute, currently known as Kering, that acquired Gucci. Interesting when it comes to Gucci is to note that it did have the ambitions of establishing itself as a fashion conglomerate, but still ended up becoming a target itself. French ownership has not hurt the performance of Gucci it seems. The graph above shows that Gucci’s revenue growth trend is outperforming the other Italian fashion houses.
Moving on, let’s look at some of the world renown Italian high fashion houses that have been able to maintain their independence.
PRADA
Prada was originally founded in 1913 in Milan as a leather goods shop. The company did not begin its ascent onto the world stage as a high fashion brand until 1978 when Miuccia Prada took over ownership of the company. Together with her partner Patrizio Bertelli, who still runs the company today, they transformed Prada to start manufacturing their own bags and eventually start producing a shoe line and women’s and men’s clothing. As where many Italian fashion houses were eventually acquired, Prada went on the acquisition path itself, but with limited levels of success. Amongst others, in 1998 the company was rumoured to have ambitions to acquire Gucci, as it had built up an almost 10% stake in the listed company but ended up selling its shares to LVMH. It joined forces with LVMH in 1999 to acquire a 51% stake in Fendi. Around that time Prada also acquired Church & Company, a luxury English shoe maker. It made several smaller acquisitions throughout these years as well. In the early 2000’s Prada was struggling with the level of debt it had taken on to finance these acquisitions and ended up selling most of the brands the company had acquired in the 1990’s. In 2011 Prada went public on the Hong Kong stock exchange, listing 20% of the shares in the company.
Although Prada is one of the oldest companies covered in this article, it can still be considered a relative newcomer as Prada did not began its transformation into a high fashion brand until Miuccia Prada and Patrizio Bertelli took over in 1978. Regarding its own acquisition attempts, Prada has not been able to establish itself as a real fashion conglomerate as it had to sell of most of the companies it acquired and return to a more focused brand offering.
ARMANI
Armani was founded in 1975 by Giorgio Armani who is still the sole owner of the company today. He is lauded is one of the most successful designers in Italian history and has remained independent and heavily focussed on the Armani brand ever since the company was founded in 1975. In this way it is quite unique in the Italian high fashion landscape to still be run and completely owned by the original founder. This fact is most likely attributable to its relatively recent rise and it stands to question what will happen to the company in the future if Giorgio Armani (currently 84 years of age) eventually decides to step back from the running of the company.
DOLCE&GABBANA
Dolce & Gabbana was founded by design duo Domenico Dolce and Stefano Gabbana in 1985. Considering its recent founding date, it is in a similar situation as Armani. The company is still fully owned and run by its founders. The founders have already thought ahead when it comes to what will happen to Dolce & Gabbana if they would no longer be able to run the company. Taking a somewhat unique approach, they proclaimed in a 2018 article that the brand would simply stop to exist as opposed to letting family run the company or selling it on.
What can be concluded from this overview of the history of M&A and Italian fashion houses? Italian fashion brands have been immensely successful worldwide and tend to go through the fastest growth under their original founders/owners. Generally, problems seem to arise when the control of the company is handed down to the third or second generation and at that point the companies are more likely to end up in the hands of a larger conglomerate.
Will there come an end to the acquiring of Italian fashion houses by foreign players? It seems unlikely. Since the acquisition of Versace, Ferragamo, maker of high-end shoes as well as every investment bankers favourite ties, has become the latest topic of discussion as the matriarch of the Ferragamo family and driving force behind the company, Wanda Ferragamo, has passed away. This immediately caused speculation that the company could become the next Italian fashion target.
Joris Jager
VALENTINO
Originally founded in 1960 by Valentino Garavani, Valentino has not been in the hands of the founding family since 1998, although Valentino Garavani was involved in the design of the clothing until 2008. Back in 1998 the family sold the company to an Italian conglomerate and it has since changed hands multiple times. The company has spent several years under ownership of private equity fund Permira, with the last transaction taking place in 2012 when the company was acquired by a Qatari investment group. It stands out that Valentino, although it has already been out of the hands of the original family for a long time, it is not part of a larger luxury brand group and still independent.
FENDI
Fendi was founded in 1925 by Adele and Edoardo Fendi. The company remained family owned for considerable time, being famously run by the second generation “five Fendi sisters” until they sold a 51% stake in the company to LVMH and Prada in 1999. LVMH bought Prada’s stake in 2001 and has over time fully absorbed Fendi into the LVMH group.
GUCCI
The history of Gucci goes back all the way to 1920 when the company was founded by Guccio Gucci alongside his three sons. The company prospered, especially after the second world war and had its peak years during the 1970’s. Things took a turn for the worse in a period of family disputes when Maurizio Gucci took over the management of the company in 1983 after his father, one of the three sons, passed away. Maurizio did not manage to successfully run the company and ended selling the company to a Bahrain investment firm in 1988. Under private ownership the company went on a considerable acquisition spree, buying amongst others Yves Saint Laurent, Bottega Veneta and Balenciaga. The company went public in 1996 shortly after which it found itself target of an acquisition attempt by LVMH. In the end it was not LVMH but Pinault-Printemps-Redoute, currently known as Kering, that acquired Gucci. Interesting when it comes to Gucci is to note that it did have the ambitions of establishing itself as a fashion conglomerate, but still ended up becoming a target itself. French ownership has not hurt the performance of Gucci it seems. The graph above shows that Gucci’s revenue growth trend is outperforming the other Italian fashion houses.
Moving on, let’s look at some of the world renown Italian high fashion houses that have been able to maintain their independence.
PRADA
Prada was originally founded in 1913 in Milan as a leather goods shop. The company did not begin its ascent onto the world stage as a high fashion brand until 1978 when Miuccia Prada took over ownership of the company. Together with her partner Patrizio Bertelli, who still runs the company today, they transformed Prada to start manufacturing their own bags and eventually start producing a shoe line and women’s and men’s clothing. As where many Italian fashion houses were eventually acquired, Prada went on the acquisition path itself, but with limited levels of success. Amongst others, in 1998 the company was rumoured to have ambitions to acquire Gucci, as it had built up an almost 10% stake in the listed company but ended up selling its shares to LVMH. It joined forces with LVMH in 1999 to acquire a 51% stake in Fendi. Around that time Prada also acquired Church & Company, a luxury English shoe maker. It made several smaller acquisitions throughout these years as well. In the early 2000’s Prada was struggling with the level of debt it had taken on to finance these acquisitions and ended up selling most of the brands the company had acquired in the 1990’s. In 2011 Prada went public on the Hong Kong stock exchange, listing 20% of the shares in the company.
Although Prada is one of the oldest companies covered in this article, it can still be considered a relative newcomer as Prada did not began its transformation into a high fashion brand until Miuccia Prada and Patrizio Bertelli took over in 1978. Regarding its own acquisition attempts, Prada has not been able to establish itself as a real fashion conglomerate as it had to sell of most of the companies it acquired and return to a more focused brand offering.
ARMANI
Armani was founded in 1975 by Giorgio Armani who is still the sole owner of the company today. He is lauded is one of the most successful designers in Italian history and has remained independent and heavily focussed on the Armani brand ever since the company was founded in 1975. In this way it is quite unique in the Italian high fashion landscape to still be run and completely owned by the original founder. This fact is most likely attributable to its relatively recent rise and it stands to question what will happen to the company in the future if Giorgio Armani (currently 84 years of age) eventually decides to step back from the running of the company.
DOLCE&GABBANA
Dolce & Gabbana was founded by design duo Domenico Dolce and Stefano Gabbana in 1985. Considering its recent founding date, it is in a similar situation as Armani. The company is still fully owned and run by its founders. The founders have already thought ahead when it comes to what will happen to Dolce & Gabbana if they would no longer be able to run the company. Taking a somewhat unique approach, they proclaimed in a 2018 article that the brand would simply stop to exist as opposed to letting family run the company or selling it on.
What can be concluded from this overview of the history of M&A and Italian fashion houses? Italian fashion brands have been immensely successful worldwide and tend to go through the fastest growth under their original founders/owners. Generally, problems seem to arise when the control of the company is handed down to the third or second generation and at that point the companies are more likely to end up in the hands of a larger conglomerate.
Will there come an end to the acquiring of Italian fashion houses by foreign players? It seems unlikely. Since the acquisition of Versace, Ferragamo, maker of high-end shoes as well as every investment bankers favourite ties, has become the latest topic of discussion as the matriarch of the Ferragamo family and driving force behind the company, Wanda Ferragamo, has passed away. This immediately caused speculation that the company could become the next Italian fashion target.
Joris Jager