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Fashion & LuxuryPrivate Equity andInvestors Survey 2020Global report3Fashion & Luxury Private Equity and Investors Survey 2020 | PrefacePrefaceDuring 2019, Fashion & Luxury (F&L) continued to grabthe attention of PE funds and Investors. Some haveraised special vehicles to be on top of trends and torecognize the best assets in the industry.During 2019 we oversaw a globalization slowdown,the rise of populism in developed nations andprominent geo-political instabilities affecting theglobal economic scenario.In this context, despite market challenges and recordhigh valuations, the F&L industry remained a majorpriority for PE funds and Investors.COVID-19 spread will strongly affect the balancefor 2020, which will likely be one of the most testingyears in recent memory; not since financial crisisof 2008/09 has so much uncertainty pervadedthe market so quickly. The unstable global trading,political and macroeconomic environments, providea major challenge for Fashion & Luxury players,whose strategies, sales channels, supply chain andemployees will likely be stressed to varying degrees.The repercussions of this changing global landscape arequickly setting the bases for sharp changes in the F&Lindustry, where the increasing presence of disruptivetechnologies and the digitalization of the businessand luxury worlds are already affecting its key playersand their business models.In this context, global investors interested in theFashion & Luxury industry are reviewing theirexpectations and strategies for the next years.In order to analyze and measure market trends andexpectations on M&A activities, Deloitte has launchedthe fifth edition of the “Global Fashion & LuxuryPrivate Equity and Investors Survey”.5Fashion & Luxury Private Equity and Investors Survey 2020 | Methodology and contentsMethodology and contentsThe study considers more than ten sectors of the F&L industry, of which three are Personal Luxury Goods.• ••• •GEO CONTENTSREMARKS DATA SOURCE SCOPE•Primarydata level• • •• •Full secondary data Full primary dataGlobal GlobalThe investors’ survey targeted senior members within private equity funds, with a substantial knowledgeof the F&L industryCompany annualfinancial reports andpresentationsInterviews withC-level industryexpertsDeloitte expertiseNews and reportsfrom major mediaproviders• Investor pressreleasesCompany pressreleasesSize of M&A deals by F&L sectorTarget company profiles• Investor profilesAnalysis of global dealsSales and margins performanceby sectorAnalysis of F&L sectors’attractiveness for investors• Covid impact assessment by sector,focusing on Personal Luxury goodsSECTORS COVEREDThe study considers more than ten sectors of theF&L industry, of which three are Personal Luxury GoodsM&A DEALMONITOR 2019F&L INDUSTRY BUSINESSPERFORMANCEMARKET SEGMENTATIONAbsoluteAspirationalAccessibleFashionPersonal Luxury GoodsApparel &AccessoriesFurnitureLuxuryHotelsLuxuryCruisesLuxuryRestaurantsDigital LuxuryGoodsPrivateJetsYachts LuxuryCarsElectricCarsCosmetics &FragrancesWatches &JewelleryAspirationalFashionAbsolutePrice point analysisLuxuryConsumers’ perceptionPrimarydata level• • • • •GlobalOnline survey basedon ComputerAssisted WebInterviewing (CAWI)Interviews withPrivate Equityfunds’ topmanagementF&L market outlook andCovid-19 impactExit and investment strategiesin 2020Investors’ current portfolio ofF&L assetsPRIVATE EQUITY ANDINVESTORS SURVEY 2020Primarydata level7Fashion & Luxury Private Equity and Investors Survey 2020 | Key takeawaysKey takeawaysMarket Insights and Perspective of F&L IndustryBusiness Performance of the F&L industry in 2019Within its analysis on F&L industry businessperformance, Deloitte aims at assessing sales andprofitability growth by each segment to highlight themost attractive sectors for investors. The analysis hasbeen conducted on a panel of 81 players with a totalsales of 633B$, 44 of them operating in the OtherLuxury sector and generating ~66% of sales, whilethe other 37 players belonging to the Personal LuxuryGoods sector and generating ~34% of sales.Overall, the panel of companies in the Personal LuxuryGoods sector reached in 2019, 1.3 times the 2015 saleslevel, growing at a +5.7% CAGR 2015-19, with a slightincrease in profitability (+0.1%). On the other hand,companies in the Other Luxury sector, reached in 2019,1.2 times the 2015 sales level, growing at a +4.1% CAGR2015-19, with a slight decrease in margin of -0.2%.Average EBITDA margin in Luxury sectors was +15.2%in 2019 (-0.1% vs 2015), with the Personal Luxury Goodssector outperforming the industry (+19.1% avg. EBITDAmargin). Apparel and Cruises are the top performingsectors in terms of profitability (+24.6% and +23.3%EBITDA margin), confirming with Cosmetics, the highestsales growth in the F&L industry in 2015-19 period.Fashion & Luxury outlook from marketperspectiveThe Covid-19 pandemic is expected to have a significantimpact on F&L industry with different immediateeffects between Personal Luxury Goods (PLG) andOther Luxury sectors. For the Personal Luxury Goods(PLG) the impact of Covid will be initially less severewith market projected to achieve 1.1 times the 2019level by 2025 (~ +1.9% CAGR 2019-25F). The OtherLuxury sectors are instead expected to suffer more theCovid-19 impact (especially luxury Hotel and Cruises),with an average drop of -25% in 2020/21, followed by arobust recover that will bring the market to 1.2 by 2025(~ +2.4% CAGR 2019-25F).In terms of sectors, the market expects Luxury Hotels,Cruises, Watches & Jewellery and Furniture to bethe most affected sectors by the pandemic, whileCosmetics & Fragrances and Private Jets will be theleast affected. In terms of post Covid recovery speed,Luxury Hotels, Apparel & Accessories and Cosmetics &Fragrances will be at the forefront, benefiting from there-open of borders and the increased focus on onlinesales.Within the PLG sector, the market expects Europe andthe Americas to suffer a longer demand contractionwith an expected drop in sales from 30 to 40% andexpected recovery time from 12 to 18 months. Themostly adopted strategies to overcome the crisis will beonline distribution channels focus, digital marketing andpromotion and environmental sustainability.8Fashion & Luxury Private Equity and Investors Survey 2020 | Key takeaways2019 Global M&A deal overviewThe Fashion & Luxury industry proved to be fertilesoil for M&A activities with #271 deals registered in2019, presenting a slight but stable increase of #6deals compared to the previous year. Personal LuxuryGoods deals have decreased (-53 deals versus 2018)with Cosmetics & Fragrances (12,5% of total) decreasingby #10 deals, and both Watches & Jewellery (4%) andApparel & Accessories (17%) decreasing by #17 and #26deals respectively. The Hotels sector, which represents43% of total, was the best segment in terms of dealsgrowth with respect to the previous year, increasingby #40. M&A deal volumes in other sectors increased,with activity in Restaurants (+7) and Jets (+2) growingcompared to the previous year. The average deal valuehas decreased at $164m in 2019, with a $69m decreasefrom 2018.M&A deals in Europe slightly decreased (-4 deals), whilstNorth America increased (+5 deals) and Asia-Pacificremained almost flat.Luxury Cars deals significantly increased during 2019(+6 deals), driven by the very active electric car’sindustry.M&A Deal Monitor 2019Top deals in 2019Acquisitions in Watches & Jewellery, Hotels andAutomotive sectors drove numbers in 2019:• Tiffany & Co. by LVMH (~16B$ for 100%).• Strategic Hotels & Resorts by Mirae Asset GlobalInvestments Co (~5.8B$ for 100%).• Rivian Automotive, LLC by 4 round fundings (~2.9B$for 100%).Other relevant acquisitions in 2019 involved Cosmetics& Fragrances, Restaurants and Apparel &Accessories companies:• Coty, Inc. by JAB Holdings B.V. (~1.7B$ for 20%).• Cooper’s Hawk Winery & Restaurants (~700M$ for100%).• Roberto Cavalli SpA by Damac Properties Co. LLC(~160M$ for 100%).M&A features and strategiesOf the M&A deals completed, 55% were carried out byStrategic investors (1%pts less than in 2018). Financialinvestors, involved in 45% of the total, increased onlyslightly the number of deals (+5 YoY).Strategic sellers were involved in 67% of thetransactions (vs.56% in 2018). Generally, bidders’investments focused equally on a buyout andconsolidation strategy (32% and 34% of the timesrespectively).9Fashion & Luxury Private Equity and Investors Survey 2020 | Key takeawaysCOVID-19 Impact from investors’ perspectiveWithin its Private Equity Survey, Deloitte focuses onunderstanding investors’ perceptions of the potentialgrowth in the F&L market in coming years. Due to thespread of Covid-19, investors expect to make changesin the way they invest. In terms of sectors, in the nextthree years investors expect Cars, Hotels, Restaurants,Cruises and Retailing to be the most affected sectorsby the pandemic. Apparel, Watches, Yacht and Privatejets are foreseen to remain stable while Cosmetics &Fragrances and Furniture will show a slight increase.Digital Luxury will be the sector most benefitting fromthe pandemic and that is expected to sharply grow inthe next three yearsIn terms of geographical areas, Asia and Middle Eastare expected to have a strong growth in the F&Lindustry, thanks also to a faster recovery from Covid-19pandemic. North America and Japan are expected toremain stable in the next three years, while Europeand Latin America are foreseen to suffer more fromCovid-19 impact and therefore to have a decreasephase.Private Equity and Investors Survey 20202020 investment strategy70% of funds are considering investing in an F&Lasset in 2019, with notable interest rising in: Apparel &Accessories (+28 pts), Cosmetics & Fragrances (+15 pts),Digital Luxury (+53 pts) and Furniture (-17 pts).Interest across these categories is increasing comparedto previous year, mostly noticeable at Digital LuxuryGoods.Both current investors and newcomers are moreattracted to consolidated sectors within the F&Lindustry (such as Apparel & Accessories and Cosmetics& Fragrances) where market knowledge is widespread.Newcomers seem more interested in Digital LuxuryGoods. With respect to 2019, the continuousconsolidation of the F&L industry is moving investmentstowards medium-sized companies (+17 percentagepoints), where investors plan to boost performanceby implementing internationalization, new productiondevelopment (+14 percentage points) and digitalstrategy design (which grew by 11 percentage points).The consensus is that forecast returns will range from21 to 30%.11Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L Industry Market Insights: Deloitte Fashion & Luxury panel in 201924%Players111Apparel & Accessories39%12%Players11157Watches & JewelleryApparel & Accessories24%Apparel & Accessories Market Insights and Perspectiveof F&L IndustryThe Fashion & Luxury industry business performance analysis was conducted on a panel of 81 companies, totalizing almost 633B$ of sales.Notes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data76%24% 111Apparel & AccessoriesPlayersTot.111B$ SalesPlayersby area20Ls111B$Map FY20191042%40%PlayersTot. SalesPlayersby area655.4B$94%PlayersTot.SalesPlayersby area0B$ 31.782%4%14%PlayersTot.Sales431.7B$82%4%14%32elsPlayersPrivate Jets2SalesPlayersby area1156.5B$layers Map FY201Playersrs Map FY2019Tot.Sales10357B$94%6%Players357Luxury CarsPlayersTot.SalesPlayersby area10357B$Luxury CruisTop Players4357B$14%Players431.7B$Top P29%Top Playby areaFurnitureot.31.7B$37%8Private JetsPlayersTot.SalesPlayersby area28.2B$29%100%5CruisesPlayersTot.SalesPlayersby area43.9B$62%38%4FurniturePlayersTot.by area83.9B$62%38%4PlayersYachtsTot.SalesPlayersby area168.2B$5Luxury CruisesPlayersTot.SalesPlayersby area44.7B$Notes: Values reportedSource: Elaboration onDeloitt4.7B$Tot.83.9B$Notes: Values reported at constant exchange ratSource: Elaboration on Company Financial RepPlayersby areaPlayersSales164.9B$eort dataal: Players81 49%39%12%575517%94%6%82%4%3263%529%100%62%38%4Watches & JewelleryPlayersLuxury HotelsCosmetics & FragrancesFurniturePlayersYachtsPersonal LuxuryGoodsPlayersofturnoverTot. Tot.SalesSalesTop Players Map FY2019Other F&LSectorsPlayersby areaPlayersby areaDeloitte F&L Panel: Players TurnoverRest of the World North America EuropeTot.374481 ~ 633B$34%66%PlayersofturnoverNotes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data 76%Players1139%12%5749%Tot.Players65517%39%40%GoodsPlayers20Watches & Jewellery1112%57Cosmetics & Fragrances65517%Personal LuxuryWatches & JewelleryCosmetics & Fragrances40%Players 42%40%5517%6%35782%4%14%3263%37%8 562%38%4Luxury HotelsPlayersLuxury Cosmetics & FragrancesPlayersPrivate JetsPlayersFurniturePlayersLuxury CarsYachtsPersoGTot.111B$ Sales Sales Tot. SalesTot.SalesTot.SalesTot.SalesOtSPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaDeloitte F&L Panel: Players TurnoverPlayersRest of the World North AmericaTot.Sales4 28 1656.5B$ 55.4B$357B$ 8.2B$B$ 4.9B$374.74481 ~ 633B$34%66%76%49%42%94%6%3573263%37%8 5100%5Luxury HotelsLuxury CruisesPlayersPrivate JetsPlayersPlayersLuxury CarsYachtsPersonal LuxuryGoodsPlayersofturnoverTot.111B$ Sales Tot. Sales Tot. SalesTot.SalesTot.SalesSalesOther F&LSectorsPlayersby areaPlayerby areaPlayersby areaPlayersPlayersPlayersby areaPlayersby areaPlayersby areaPlayersby areDeloitte F&L PaneTurnoverPlayersRest of the World North America EuropeTot.Sales20 24 1656.5B$ 55.4B$8.2B$4.9B$374.7B$44~ 633B$34%66%Playersofturnoverat constant exchange rateCompany Financial Report data76%24%11149%42%35763%37%8 529%100%5Luxury HotesPlayersPlayersPlayersuxury CarPlayersofturnoverTot.Sales Tot. Sales Tot. SalesTot.SalesTot.SalesTot.SalesOther F&LSectorsPlayersby areaSalesPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaPlayersby areaF&L Panel: Players TurnoverPlayersRest of the World North America EuropeTot.Sales20 11 64 8 56.5B$ 55.4B$3.9B$ 4.9B$374481 ~ 633B$34%66%PlayersofturnoverNotes: Values reported at constant exchange rateSource: Elaboration on Company FinancialReport data12Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryMarket Insights: Sales performance 2015-19The F&L top players sales index in 2019 is 1.3x the 2015 value. Personal Luxury Goods show a positive growth (+5.7% CAGR 2015-19) with astable EBITDA %. Other luxury sectors are growing less (+4.1% CAGR 2015-19), with a slight decrease in profitability.Notes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data and Desk analysis 1251171.2x 2015 2016 2017 2018 20191001.3×2015-19 F&L Sales Index evolution(Index of Sales 2015=100, Percentage) EBITDA %PLG19.0%18.5%17.3%18.4%19.1% EBITDA %Other Lux13.4% 12.6% 12.6% 13.1% 13.2% -0.2% change2015-19+0.1CAGR2015-19+5.7%+4.1%PersonalLuxury GoodsOther LuxurySectorsNotes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data and Desk analysis2015-19 F&L Sales Index evolution(Index of Sales 2015=100, Percentage)13Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryMarket Insights: itability performance 2015-19Average EBITDA margin in Luxury Sectors is 15.2% in 2019 (-0.1% vs 2015), with Personal Luxury Goods (+19.1%) outperforming the overallindustry. Apparel and Cruises are the top growing sectors in terms of sales growth and those with the highest profitability.Notes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data2019 Average EBITDA Margin by Sector(Percentage) Cosmetics &FragrancesWatches &JewelleryCruises F Hotels Private Jets urniture Cars YachtsApparel &Accessories% change2015-19 +2.4– -1.0 -1.1 4.7 +0.6 +1.7 +2.1 -4.5 +3.3% change2018-19 +1.9-0.6 +0.7 – +0.1 1.4 +0.1 +3.8 -1.8 +0.1 Avg.F&L 2019+15.2%24,6%16,6% 16,2%23,3%15,1%12,2% 11,9% 11,3%5,3%Average PersonalLuxury Goods+0.3PanelAverage-0.1Personal Luxury GoodsOther Luxury Sectors+19.1% Avg. F&L 2015+15.3%Notes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report data2019 Average EBITDA Margin by Sector(Percentage)14Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryMarket Insights: Business performance analysis 2015-19Cruises and Cosmetics are the most attractive sector for F&L investors, with the highest sales growth and margin.Apparel & Accessories is still the top performing category in terms of marginality.Notes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report dataF&L Sectors business performance map(Percentage)0 4% 8% 12%142% 14166% 10%18206 4 2 02881012EBITDA Margin(Percentage – 2019) FurnitureCarsPUnderperformersAVGCosmetics & Fragrancesrivate JetsYachtsFast growing – low performingApparel & AccessoriesCruisesBest in classWatches & JewelleryHotelsHigh profitability Sales growth(Percentage – CAGR 2015-19)Total SectorSales 2019AVGOther F&LsectorsPersonalLuxuryGoodsNotes: Values reported at constant exchange rateSource: Elaboration on Company Financial Report dataF&L Sectors business performance map(Percentage)15Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryCovid impact on Luxury sectors – Market perspectiveHistorical market trend: Negative Stable Positive SECTORCOVID IMPACTPRE-COVIDTREND Apparel &AccessoriesWatches &JewelleryCosmetics &FragrancesLuxuryCarsLuxuryHotelsPrivateJetsLuxuryCruisesFurnitureYachtsFocus of next slidesGlobal sales expected to drop significantly in 2020(-20%) because of store closing and economicslowdown during Covid pandemicHigh Covid impact (-20/25% on sales) during thelockdown phase, since this category has not benefittedfrom online salesCovid negative impact on Cosmetics has been slowerwith respect to other Personal Luxury Goods categories(-11%), with major effects in EuropeThe luxury segment is expected to be less impactedfrom Covid thanks to a non-Chinese based value chainand high-level target customersHospitality is the most affected sector by Covid andalso the luxury hospitality segment is suffering a lotfrom travel limitationsExpected increase in demand due to the shutdownof commercial aviation because of Covid restrictionsThe impact of Covid is expected to affect sales fora long time, particularly in the Asian marketThe industry is highly suffering the impact of CovidImmediate negative impact due to travel restrictionsPotential positive impact on demand due to priceslowering from suppliersPost-Covid recovery: Strong Fast Gradual Very slowSource: Elaboration on Desk analysis and interviews with industry expertsPOST COVID RECOVERYHigh impact from Covid due to travel restrictionsand health security issues related to this businessIt is expected a longer recovery time with someconcerns as expressed by some Luxury interiordesigners and furniture brandsAfter Covid, it is expected an increasing interest inprivate charters over group charters or cruiseholidays, boosting the recoverApparel and accessories is the category that mostbenefit from online sales, driving the growth in theafter Covid recovery periodSlow recovery is expected, since this category relya lot on tourists flow and on a consolidate in-storepurchasing processFast recovery focusing on online sales-channels andskin care productsCustomers will be more aware of natural ingredients,with more attention on healthcareAfter Covid it is expected a solid recovery, in line withpre-Covid trendThe luxury segment is expected to boost fast asborders re-open and people will be allowed totravelThe growth is expected to continue. Customers willprefer private means of transportation to avoid lawrestrictions and preserve healthCovid impact: High LowSource: Elaboration on Desk analysis and interviews with industry experts16Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L Industry“How do you think Covid will affect demand and offer in your sector by 2020?”(Percentage range)“… As part of the Spring Summercollection is still unsold in store, we arereducing the production for the FallWinter anticipating the expecteddecrease in demand, until the businesswill recover …”Strong decrease Decrease Lower decrease“… Europe and Americas will sufferlonger the impact of Covid leading to ademand contraction because of thepandemic lockdown and the economicdownturn …”“… Our company, which is more focusedon accessories and leather goods, isnot reducing the production since wecan count on a rising demand from theonline sales channel …”“… Since luxury companies could nolonger count on the high flow of tourists’consumption, we are dedicating moreattention on local customers …”APAC15-20%China & Japan5-10%Europe25-30%Latin America20-25%North America20-25%RoW15-20%Source: Elaboration on Desk analysis and interviews with industry expertsKey insights from C-Level ofPLG companiesCovid-19 impact on Personal Luxury Goods (1/4) – Market perspectiveSource: Elaboration on Desk analysis and interviews with industry expertsKEY INSIGHTS FROM C-LEVEL OF PLGCOMPANIES“… Europe and Americas will suffer longer the impactof Covid leading to a demand contraction because ofthe pandemic lockdown and the economic downturn …”“… As part of the Spring Summer collection is stillunsold in store, we are reducing the production forthe Fall Winter anticipating the expected decrease indemand, until the business will recover …”“… Our company, which is more focused on accessoriesand leather goods, is not reducing the productionsince we can count on a rising demand from theonline sales channel …”“… Since luxury companies could no longer count on thehigh flow of tourists’ consumption, we are dedicatingmore attention on local customers …”“How do you think Covid will affect demand and offer in your sector by 2020?”(Percentage range)17Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryKEY INSIGHTS FROM C-LEVEL OF PLGCOMPANIES“… We expect sales to be more affected in theEuropean and American market, while the APACmarket will suffer less due to a faster recovery time …”“… It is expected a boost in the online sales channel,that will sustain the market demand especially duringthe lockdown pandemic phase …”“… Companies that don’t have a fragmented footprintand build solid relationships with suppliers will becapable to better sustain their business during theCovid period …”“… Store closing in Covid phase 1 and sanitaryprecautions that will be taken in phase 2, will havea strong impact on physical retail and wholesalechannels (-20% to -30% on sales). However it isexpected a boost on digital retail (+16%) and digitalwholesale (+12%) channels…”45%“How do you think Covid will impact your business in 2020 in terms of sales’contraction?”(Percentage on respondents)“… We expect sales to be more affectedin the European and Americanmarket, while the APAC market willsuffer less due to a faster recovery time…”“… It is expected a boost in the onlinesales channel, that will sustain themarket demand especially during thelockdown pandemic phase …”“… Companies that don’t have afragmented footprint and build solidrelationships with suppliers will becapable to better sustain their businessduring the Covid period …”“… Store closing in Covid phase 1 andsanitary precautions that will be takenin phase 2, will have a strong impacton physical retail and wholesalechannels (-20% to -30% on sales).However it is expected a boost ondigital retail (+16%) and digitalwholesale (+12%) channels…”APAC30%55%5%10%from 0% to 20%From 20% to 30%From 30% to 40%> 40%EuropeAmericas50%15%30%5%Expected drop in sales20%55%20%5%Source: Elaboration on Desk analysis and interviews with industry expertsKey insights from C-Level ofPLG companiesCovid-19 impact on Personal Luxury Goods (2/4) – Market perspectiveSource: Elaboration on Desk analysis and interviews with industry experts“How do you think Covid will impact your business in 2020 in terms of sales’contraction?”(Percentage on respondents)18Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L IndustryCovid-19 impact on Personal Luxury Goods (3/4) – Market perspectiveSource: Elaboration on Desk analysis and interviews with industry experts“When it is expected the normalization period and how Covid will affect theGeographical footprint?”(Percentage on respondents)APAC20%60%15%5%from 6 to 12 monthsfrom 3 to 6 monthsfrom 12 to 18 months> 18 monthsEuropeAmericas45%0%10%45%40%5%50%5%“… In Europe, companies more focusedon Northern countries that have beenless impacted from Covid, will havehigher benefits …”“… Luxury shopping is likely to restartfirst in China if the virus remains undercontrol there. Continued restrictions ontravel will also mean that manypurchases that would have beenmade abroad will happen in China,since Chinese shopping counts asignificant slice of luxury consumption…”“… Normalization period in Europe isexpected gradually in 6 to 12 months.In America we forecast a longerrecovery period (over the year) whilethe Asian market will recover faster.However a pre-Covid situation will bepossible only with the vaccine …”Expected recovery timeSource: Elaboration on Desk analysis and interviews with industry expertsKey insights from C-Level ofPLG companies“When it is expected the normalization period and how Covid will affect theGeographical footprint?”(Percentage on respondents) KEY INSIGHTS FROM C-LEVEL OF PLGCOMPANIES“… Normalization period in Europe is expectedgradually in 6 to 12 months. In America we forecast alonger recovery period (over the year) while the Asianmarket will recover faster.However a pre-Covid situation will be possible only withthe vaccine …”“… In Europe, companies more focused on Northerncountries that have been less impacted from Covid, willhave higher benefits …”“… Luxury shopping is likely to restart first in Chinaif the virus remains under control there. Continuedrestrictions on travel will also mean that manypurchases that would have been made abroad willhappen in China, since Chinese shopping counts asignificant slice of luxury consumption …”19Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L Industry“Which will be the major driversand strategies that you will adoptto overcome the Covid crisis?“… There won’t be a disruption inproduct categories but we expect arevamping of brand identity and thevalorization of classy luxury, withcustomers seeking for elegant shapesand neutral tones, reflecting a sober lifeconsciousness …”“… We are pushing more on the onlinesales channel, signing partnerships withe-commerce platforms …”“… We are pushing a lot ondigitalization to ensure the businesscontinuity, launching the first virtualshowroom to collect sales orders …”“… It is necessary to anticipate shifts inconsumer sentiment and behavior beingmore aware of sustainability and ofresponsible consumption. Under thisnew framework, we are rationalizingcollections and balancing prices …”Pre CovidAfter CovidClassy luxurystyleCollectionsbreadth anddepthEnvironmentalsustainabilityOnline distributionchannels focusProducts value formoney awarenessDigitalMarketing &promotionHighLowSource: Elaboration on Desk analysis and interviews with industry expertsKey insights from C-Level ofPLG companiesCovid-19 impact on Personal Luxury Goods (4/4) – Market perspectiveSource: Elaboration on Desk analysis and interviews with industry experts“Which will be the major driversand strategies that you will adoptto overcome the Covid crisis?” KEY INSIGHTS FROM C-LEVEL OF PLGCOMPANIES“… There won’t be a disruption in product categoriesbut we expect a revamping of brand identity and thevalorization of classy luxury, with customers seekingfor elegant shapes and neutral tones, reflecting a soberlife consciousness …”“… We are pushing more on the online sales channel,signing partnerships with e-commerce platforms …”“… We are pushing a lot on digitalization to ensurethe business continuity, launching the first virtualshowroom to collect sales orders …”“… It is necessary to anticipate shifts in consumersentiment and behavior being more aware ofsustainability and of responsible consumption.Under this new framework, we are rationalizingcollections and balancing prices …”20Fashion & Luxury Private Equity and Investors Survey 2020 | Market Insights and Perspective of F&L Industry ForecastPLG idx growth: 2.2xOther Lux idx growth: 1.9xDrop due to Covid impact, thatwill affect in particular otherluxury sectors (avg. -25% YoY 19-20) with main consequences onHotels and Cruises Revenue 2422161002010 2015 2016 2017 2018 2019 2020FC 2021FC 2025FCPersonalLuxury GoodsOther LuxurySectorsOther Lux idx growth: 1.2x PLG idx growth: 1.1x Notes: Covid assumptions under a basic scenarioSource: Elaboration on Company Financial Report data, Desk analysis and interviews with industry experts2010-25F F&L sales index outlook(Index on Sales 2010=100)CAGR2019-25F+1.9%+2.4 %Market Outlook: Sales forecast – Market perspectiveAfter the drop in 2020 due to Covid impact, PLG is expected to achieve by 2025, 1.1 times the 2019 sales level (+1.9% 2019-25F CAGR).Other luxury segment will initially suffer more from Covid impact, and will reach by 2025, 1.2 times the 2019 sales level (+2.4% CAGR2019-25F) thanks to a robust and faster recover.2010-25F F&L sales index outlook(Index on Sales 2010=100)Notes: Covid assumptions under a basic scenarioSource: Elaboration on Company Financial Report data, Desk analysis and interviews with industry experts23Fashion & Luxury Private Equity and Investors Survey 2020 | M&A Deal Monitor 2019M&A Deal Monitor 2019DEALS IN 2018Sector 2018 2019 Growth-26+40-17-10+5+2-4+6-2DEALS IN 2019 DEALS265 +67375284414986471151134 1911 4124 24 11271Personal Luxury Goods (PLG) +7RestaurantsDigital Luxury Goods05+5 Apparel & AccessoriesHotelsWatches & JewelleryCosmetics & FragrancesFurniturePrivate JetsYachtsCars (including Electric Cars)CruisesFashion & Luxury M&A dealsOverview of deals in 2018 by sector Top luxury deals of 2019Month Target Bidder Stake (%) Value ($m)Nov.1 Tiffany & Co. LVMH Moet Hennessy Louis Vuitton SE 100 16,192Sep. Strategic Hotels and Restaurants Inc. Mirae Asset Global Investemnts Co., Ltd. 100 5,800Dec. Rivian Automotive, LLC.2nd by Ford Motors, 3rd by Cox Automotiveand 4th T. Rowe Ass)Jab Holdings B.V.Coty Inc.Millenium & Copthorne Hotels Plc.City Developments LimitedDeutsche HospitalityCooper’s Hawk Winery & RestaurantsHuazhu Group LimitedAres Management LLC.Crown Resorts LimitedKylie Cosmetics, LLC.Byton, Ltd.Tatcha, LLC.Sykes Cottages LimitedMelco Resorts & Enterntainment LimitedCoty, Inc.China FAW Group Corporation LimitedUnilever Plc.Vitruvian Partners LLP.Andaz SingaporeHoi Hup Realty Pte Ltd.Dream Cruises Holding Limited TGP Capital LP.Freehand HotelsQueensgate Investments LLP. 4 funding rounds (1st led by Amazon.com,100 2,850Feb. 20 1,747Jun. 35 987Nov. 100 780Jul. 100 700May. 20 608Nov. 51 600Sep.1 100 500Jun. 100 500Oct. 100 481Oct. 100 475Aug. 35 454Jul. 100 4001) Still Pending | Note: the analysis considers both closed and announced deals during 2019 | Source: Elaboration on Deloitte intelligence data24Fashion & Luxury Private Equity and Investors Survey 2020 | M&A Deal Monitor 2019M&A deals by region and sector 2019Overview of deals in 2019 by RegionEurope2018 2019151 147201710911 16 2516854376183 3 450124616214714Apparel & Accessories Cosmetics & FragrancesOthersHotelsWatches & JewelleryPrivate JetsYachts-4Middle East2018 20193 22017911 121 8+7North America2018 201958 6320175918 17651751014251521588 91410+5Asia-Pacific2018 201936 3820176 76108 7401 41 2311421212+2# Variance 2018-19(Number of deals)Japan2018 20194 82017332 1 1 412 1-5Rest of the world2018 20196 8201791 411 4 213 1 5+1KEY FINDINGSJapan and Europe werethe regions which saw thehigher decrease of Fashion &Luxury deals in 2019, with 5and 4 less deals respectively.North America presented aslight increase (+5 deals) andAsia-Pacific remained almostflat with respect to 2018.Luxury Hotel and Appareldeals were present in allmajor regions, and werenotable drivers of M&Aactivity globally in 2019.Middle-East presented agood increase (+7) in F&Ldeals since 2018, thanks tothe Hotels segment.Source: Elaboration on Deloitte intelligence data25Fashion & Luxury Private Equity and Investors Survey 2020 | M&A Deal Monitor 2019The F&L soil has continued to be a fertile one, with 271 M&A deals in 2019, showing a 2,3% increase from 2018.Personal Luxury Goods (-11% pts YoY) represent 34% of all deals.Size of main M&A dealsSource: Elaboration on Deloitte intelligence dataNumber of deals in 2019 – Breakdown by sector(Number of deals, Percentage)Furniture PrivateJetsYachts Cruises TotalF&LCosmetics & Hotels CarsFragrancesWatches &JewelleryApparel &Accessories Sector % 17.3%Var.# 2018-19 -264.1%-1712.5%-1042.4%+407%+54.1%+20.7%-2100.0%+61.5%-44.4%+64.1%+7+51.8% PLG YoY 2018-19-53Restaurants55% 66%34%DigitalLuxury26747 113411519 11 4 12 2 11 5Source: Elaboration on Deloitte intelligence dataNumber of deals in 2019 – Breakdown by sector(Number of deals, Percentage)KEY FINDINGSCars and Restaurantsregistered #6 and #7 dealsmore respectively comparedto 2018.Apparel and Watches &Jewellery deals decreased by#26 and #17 respectively.The Hotel sector has becomemore attractive to investorsduring 2019, becoming thetop gainer in terms of dealnumber (+40).26Fashion & Luxury Private Equity and Investors Survey 2020 | M&A Deal Monitor 2019Source: Elaboration on Deloitte intelligence dataNumber of deals in 2019 – Breakdown by sector(Number of deals, Percentage)Furniture PrivateJetsYachts Cruises TotalF&LCosmetics & Hotels CarsFragrancesWatches &JewelleryApparel &AccessoriesSector % 17.3% 4.1%Var.# 2018-19 -26 -17-10(%)-43% -61%+5 +2-4-30% -30%-2+6+7-59% -34% -79%12.5% 42.4%340% N/A7%-30%4.1%-30%0.7%100.0%+6-93%-93%1.5% 4.4%509%509%4.1%-79%+51.8%-95%-95%YoY 2018-19YoY 2018-19(%)+400N/A0340%-43%-61%-59%-34% PLG YoY 2018-19-53Restaurants55% 66%34%DigitalLuxury26747 113411519 11 4 12 2 11 5KEY FINDINGSApparel saw their averagedeal value fall in 2019, whileCosmetics (+340%YoY) andRestaurants (+509%) saw theiraverage value increase.Cruises (-43%YoY), Automotive(-61%% YoY), Hotels (-30%YoY),Furniture (-93%), PrivateJets (-79%) and Yachts(-95%) recorded remarkabledecreases.Average value of main deals by sectorDeals related to the Cruises industry were the largest in 2019 as in 2018 with an average value of $436m. Cars andCosmetics were the next largest with average value of $370m and $277m respectively. The average deal value ofPLG’s in 2019 was $140m*.Note: The average deal value has been calculated based upon data of disclosed transactionsSource: Elaboration on Deloitte intelligence data* Tiffany & Co. Deal has not been taken into account for the calculations but it was the largest one (around $16bn).Average value per deal in 2019 – Breakdown by sector($m, Percentage)WatchesCruises Cars Cosmetics Digita Luxury l Hotels F F& &L L A Av vg g.. Restaurants Apparel & Jewellery Privat Jets e Yachts FurnitureAvg. PLG$140mPersonal Luxury GoodsOther Luxury sectors436370277198 186164146786426 14 12F&L AverageNote: The average deal value has been calculated based upon data of disclosed transactionsSource: Elaboration on Deloitte intelligence data* Tiffany & Co. Deal has not been taken into account for the calculations but it was the largest one (around $16bn).Average value per deal in 2019 – Breakdown by sector($m, Percentage)WatchesCruises Cars Cosmetics Digita Luxury l Hotels F F& &L L A Av vg g.. Restaurants Apparel & Jewellery Privat Jets e Yachts FurnitureAvg. PLG$140mPersonal Luxury GoodsOther Luxury sectors436370277198 186164146786426 14 12F&L AverageNote: The average deal value has been calculated based upon data of disclosed transactionsSource: Elaboration on Deloitte intelligence data* Tiffany & Co. Deal has not been taken into account for the calculations but it was the largest one (around $16bn).Average value per deal in 2019 – Breakdown by sector($m, Percentage)54Fashion & Luxury Private Equity and Investors Survey 2020 | GlossaryGlossaryMain terms and abbreviationsPersonal Luxury Goods Personal Luxury Goods include the followingsectors: Apparel & Accessories, Cosmetics &Fragrances and Watches & JewelleryApp&Acc Abbreviation for Apparel & AccessoriesAuM Acronym for Assets Under ManagementCAGR Acronym for Compound Annual Growth RateCos&Fra Abbreviation for Cosmetics & FragrancesF&L Abbreviation for Fashion & LuxuryIRR Acronym for Internal Rate of ReturnPE Acronym for Private EquityPLG Acronym for Personal Luxury GoodsRoW Acronym for Rest of the WorldSel Ret Abbreviation for Selective RetailingWat&Jew Abbreviation for Watches & Jewellery