In such new scenario, which is bound to turn real starting from 2022, analysts make theoretical predictions. According to one of their “what if” assumptions, they figure that Kering could possibly buy out Burberry. Some luxury brands might not be able to recover from the crisis caused by the pandemic. The ones who fail, or go through heavy difficulties, might easily be in the grip of other brands, which, in contrast, will manage to get over the crisis and, consequently, restore their cash availability.
Analysts and what if
Pierre Mallevays, who founded Savigny Partners, analysed the current situation: he emphasized that luxury stocks have been losing, on average, 20 to 25% of their value, since January. He also looked into the situation following the 2008 recession. At that time, from 2010 to 2011, some important acquisitions took place. For example, LVMH bought out Bulgari.
Prospective goals: two different types
Mario Ortelli, managing partner of Ortelli & Co, has pinpointed, in Vogue Business, three different types of prospective goals in the luxury industry. The first one is about businesses going through financial difficulties, which, consequently, may get in the sights of some private equity companies. The second one is about other companies, listed at the Stock Exchange, without a majority shareholder in charge of them. “Other than Tiffany, there are not many goals like that. The best-known available brand is Burberry, which is also one of the few relevant goals on the market. For the records, its stock listing slumped by about 40% since the beginning of the year”, remarked Ortelli.
The third one is about some family-run businesses, which rely on a sound financial standing. Considering how complicated the market situation is at present, some of those families might start thinking about a prospective divestiture. “This could be a unique opportunity, for potential buyers, to buy out a unique asset”, claimed Ortelli. He has mentioned Prada and Chanel, yet admitting that it can be very difficult to carry out both deals.
A few small clues
Last February 12, Kering stated they are going to keep on the lookout for some possible acquisitions in the market. While dealing with this context, they will be under pressure after LVMH, their rivals, have successfully achieved Tiffany acquisition. In the meantime, Burberry have made public their market value, which amounts to about 5 billion British pounds. Which has been, again, the lowest value for nearly four years. At this point, we are ready to shake ingredients and prepare an “analysts and what if” cocktail.
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