FOCUS-Private equity persuades Italian luxury suppliers that bigger is better


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Italian small luxury brands join forces

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Fund investments that help drive integration

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Large groups can speed delivery to customers

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It also facilitates proof of ESG credentials

Elisa Anzorin and Valentina Zha

MILAN (Reuters) – As competition has gone global, Italian companies have realized the limits of the ‘small is beautiful’ motto. Backed by private equity funds, the companies supplying the booming luxury goods industry are now finding unity.

Italy, with its fine craftsmanship tradition, is home to thousands of small manufacturers covering 50-55% of the world’s production of luxury clothing and leather goods, compared to 20-25% in the rest of Europe. am.

These smaller, mostly family-owned businesses often struggle to meet the changing needs of the luxury brands they serve.

To address the growing sustainability concerns of luxury shoppers while ensuring timely delivery, brands are looking to establish closer relationships with their suppliers. Suppliers need to invest heavily to track the sourcing of materials and build a suitable digital backbone.

Private equity funds have turned to “buy and build” strategies to tackle supply chain challenges in the luxury goods industry after running out of big brands to buy.

“Luxury brands are growing exponentially. Our customers needed to grow with us.

In 2020, the Giantinis sold the company to VAM Investments, managed by former Bvlgari CEO Francesco Trapani, and two other Italian investments that have become part of the luxury garment manufacturing hub. Did.

“By working together, we can guarantee stable production levels and take on projects that would otherwise be too costly,” says Giuntini.

advantage italy

Private equity has had a major impact on shaping the Italian fashion industry. It accounts for 40% of deals in the last decade or so, including acquisitions of Moncler, Versace, Roberto Cavalli and Ermenegildo Zegna, according to a KPMG study.

The COVID-19 pandemic, along with the aftermath of supply chain disruptions, has played a pivotal role in convincing Italian baby boomer business owners that it is the right time for outsiders to enter private companies. I have fulfilled.

Giantini’s business is now part of Gruppo Florence, a hub owned by a fund and family that sold the business and reinvested a portion of the proceeds.

The group now includes 22 companies with combined revenues in excess of €500 million ($542 million) and aims to have 30 companies before considering a potential initial public offering.

Meanwhile, after attracting interest from investors including Carlyle and Permira, the company has begun working with Bank of America and Citi to evaluate strategic options, two people familiar with the matter said. All interested parties declined to comment.

“There is no listed asset that offers investors a Made in Italy supply chain for the luxury sector,” VAM CEO Marco Piana told Reuters.

“This is one of the few sectors where being Italian gives you a competitive advantage. No other region has the same know-how when it comes to manufacturing soft luxury products.”

Luciano Barbetta, whose southern Italian clothing company joined Gruppo Florence last year, said the hub would help producers compensate for delays in the delivery of raw materials.

“There are several companies that can help each other to fulfill orders on schedule, and it feels good to know that all the burden is not just on my shoulders,” said Barbetta. said.

production niche

Italy’s manufacturing sector is also a hunting ground for big luxury brands eager to secure their supply chains.

Private equity investors and fashion giants are potential competitors, but KPMG partner Stefano Cervo said the supply chain niche is good for funds and less attractive to luxury conglomerates. I pointed out it wasn’t.

“It makes sense for a big brand to buy a tannery that specializes in rare hides, for example, but I don’t think they would be interested in, say, a manufacturer of gold-coated handbag chains or buttons.” he said.

“Still, there is value in bringing the Golden Coating manufacturers together. From a sustainability standpoint, the larger scale makes it easier to recycle production waste and reduce our carbon footprint.”

For example, Italian private equity firm XENON International is betting on producers of luxury materials and finishes, bringing them together in MinervaHub.

Seven companies in the portfolio, including manufacturers of metal accessories and specialists in surface finishing, have total sales of €180 million, and Minerva Hub wants to scrutinize six more companies to increase that to €300 million.

MinervaHub supports businesses not only on legal and financial issues, but also on environmental, social and governance (ESG) issues, said Franco Prestigiacomo, Founding Partner and Managing Director of XENON.

This is essential in an industry “obsessed” with ESG, says KPMG’s Cervo.

“Suppliers can pose a significant risk to brand reputation,” said VAM’s Piana.

“In the world of social media, not having full visibility into the supply chain is very dangerous.” ($1 = €0.9225) (Reporting by Valentina Za and Elisa Anzolin, Editing by Keith Weir and Susan Fenton)



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