Luxury ‘polishes’ its valuation: reaches 13.2 times ebitda

Luxury polishes itself during full M&A wave. In a year characterised by the sale of groups such as Versace or partnerships such as Chanel and Fartetch’s, the average valuations of luxury fashion groups reaches13.2 times their ebitda, ahead of the multiples of 12.2 from last year and 10 in 2016.

The biggest M&A of the year has been the acquisition of Versace by Michael Kors. The Italian luxury group became part of the United States conglomerate, which since last year is also integrated by Jimmy Choo, in a transaction valued in 2 billion dollars (1.7 billion euros).

In 2017, sales reached 185 million euros on average, and 20% more transactions were registered, according to the report The Luxury and Cosmetics Financial Factbook 2018 carried out by consultant EY.

There were 20% more transactions in the luxury sector in 2017 than in the previous year

The calculations exclude the three biggest operations of 2017: the purchase of Christian Dior Couture by part of LVMH, the acquisition of Italian leather industry business CF&P by Burberry and the merge of Essilor and Luxottica.

The investors of most M&As in the luxury sector were investment funds, which entailed about 49%. Furthermore, most high-end fashion transactions, 51% of them, were gathered in the United States, Italy and France.

In 2017, there were several far-reaching transactions in the sector. Coach completed the acquisition of Kate Spade for 2.4 billion dollars (2.18 billion euros). Michael Kors, for his part, acquired the whole of the luxury footwear group Jimmy Choo through an operation which ascended up to 1.35 billion dollars (1.15 billion euros). On the other hand, the Chinese group Fosum, owner of the Italian Caruso, closed the acquisition of the French luxury company Lanvin through an import that was not disclosed.

Cosmetics beat luxury

Despite the rise in valuation and the number of operations in the fashion and complements sector, cosmetics continue to have the biggest value multiples. In 2018, the average price that was paid for companies in this segment ascended up to 15.7 times ebitda ahead of the multiple 13.6 of 2017 and 13.4 in 2016.

In 2017, there were 42% more transactions regarding perfumes and cosmetics companies. This year was marked by two important M&As in the sector. The most relevant one was The Body Shop acquisition by part of Brazilian Natura, whose import ascended to 1.12 billion dollars (935 million euros) and created a new cosmetics giant with 3,200 stores in 69 countries.

The French giant L’Oréal also went shopping in 2017. In January, the group acquired three brands -CeraVe, AcneFree and Ambi- from Valeant for a price of 1.3 billion dollars. In May, the company acquired the South Korean group Nanda for a price of 400 billion won (310.3 million euros) and the American Pulp Riot.

The cosmetics sector’s M&As reached an average valuation of 15.7 times ebitda

Another of the M&As that were carried out in the cosmetics sector during 2017 was the acquisition by part of Douglas of Spanish brands Bodybell and the network of stores of Perfumerías If. The German group also enlarged its portfolio in 2017 through the purchase of the Italian company Limoni y La Gardenia.

Parallelly, the document points out that the average offers in the cosmetics sector stood at 304 million euros. Whereas most luxury transactions were carried out by private funds, 70% of cosmetics M&A were done by companies, 57% of them concentrating in the United States, Italy and France.