British raincoat manufacturer Burberry Group Plc and German fashion brand Hugo Boss AG are among the luxury-goods firms that are being marked as potential M&A targets this year in Europe.
The sector appears to be ready for a mergers acquisitions wave with sales of luxury goods expected to withstand the darkening economic outlook and Chinese demand enjoying a post-Covid reopening boost, according to an informal Bloomberg survey of 17 M&A desks, fund managers and analysts. Companies and investors look to dealmaking and consolidation as the initial public offerings window remains closed.
Hugo Boss and Burberry were mentioned multiple times as potential takeover candidates in the survey, along with Italy s SpA, Tod s SpA. It is even after many stocks have doubled in value since the early days of the pandemic, while short supply of luxury assets means bidders will need to pay top dollar.
Among other industries, media company Vivendi SE topped the survey list amid speculation that billionaire Vincent Bollore will try to increase his 29% stake after closing the 5.7 billion-euro $6 billion sale of his group's African ports business to MSC.
Luca Solca, senior research analyst at Sanford C. Bernstein, said that the luxury industry normally happens at punchy share price levels, as attractive acquisition targets are few and far apart.
Many expect France s €415 billion luxury behemoth LVMH to be the one that snaps up rivals. Bank of America Corp. predicted in January that it would be most likely to participate in a deal due to its track record and balance sheet deleverage.
With a tough competitive environment for smaller companies, owners of rare assets may be tempted to sell their brands to larger players, who would be more and more in a position to cherry pick, Solca said.
The survey coincides with a worsening M&A outlook, as higher interest rates and a recession bite. According to Bloomberg's data, the European M&A totaled around $137 billion in January, about 60% less than year-ago levels, and one of the worst quarters of the past 20 years.
With help from Albertina Torsoli and Paul Jarvis.
None of China lent heavily to developing nations. It is helping Them manage their debt now.