KPMG LUXURY SUMMIT M&A Fashion & Luxury in Italy

M&Ainthe
Fashion&Luxury
sectorinItaly:
Accelerateand
sustainthegrowth
Maurizio Castello, KPMG Advisory Partner
Il Sole 24 Ore - 9th Luxury Summit
Milano, May 24th 2017

2© 2017 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Keyquestionstobeaddressed
M&A for Growth
Are Italian firms
still preys or
are they
starting to
acquire
abroad?
Who are the
main buyers
and how are
they evolving?
Are high M&A
multiples still
sustainable?
Is external
financing a real
solution to sustain
growth?
What are the
perceived barriers
for acquisitions?
How should
Shareholder &
Manager roles
evolve?
What are the key
requirements for
growth for Medium
Enterprises?
What are
equity
investors
looking for in
a potential
deal?
What are the
most wanted
categories?
?
The story so far… …What's next?

Thestorysofar…

AreItalianfirmsstillpreys?
Numbers of F&L deals in Italy
The story so far…
— 252 Fashion & Luxury deals completed from 2010 to 2017, of which 132 from 2014
— Foreign investors still very active (around 30% of total 2014-2016 deals)
— Italy is slowly increasing its presence abroad (e.g. Net-A-Porter, Roger Vivier,
Woolrich)
— Golden Goose/Carlyle
— Buccellati/Gansu Gangtai
— Arclinea/B&B(Investindustrial)
— Philippe Model/21
Investimenti
— Yoox/The Net-A-Porter
— Roger Vivier/Tod's Group
— Sergio Rossi/Investindustrial
— Giorgetti/Progressio
— Cavalli/Clessidra
— Moncler/Eurazeo
— Poltrona Frau/Haworth
— Versace/Blackstone
5
12 9
18
14
7
13
6
6
5
5
6
7
10
3
12
13
15
20
14
19
22
11
17
31
29
43
34 33
45
20
0
5
10
15
20
25
30
35
40
45
2010 2011 2012 2013 2014 2015 2016 April
2017
Source: KPMG Advisory Italy
Main deals 2014-2017
132 dealsItaly Italy
Italy  Abroad
Abroad  Italy

63%
52%
25%
30%
10%
13%
3%
2% 2%
1 2
Whoarethemainbuyersandtheirevolution?
The story so far…
Private Equity: Blackstone, Carlyle, Clessidra, Tamburi,
L Capital/L Catterton, Investcorp, Ergon, Sator, NB
Renassiance, Charme, 21 Investimenti, Investindustrial,
Progressio
Corporate: Yoox Net-A-Porter, Tod's Group, Europeenne de
Participations Industrielles, Campari, Haworth, Gansu
Gangtai, Hanes Brands, Philipp Plein, OVS, Prada, Piquadro
N. deals by investor type
Emirates investors: Mayhoola, Alabbar Enterprises
IPO: OVS, Italian Wine Brands, Masi, Fope
Other investors / financials: Italian Holding Moda, Veneto
Sviluppo, Family Offices, Club deals
100%=120 100%=132
Main buyers in 2014-2017
2010-2013 2014-2017
— Corporate were less active in the last 3 years (no more LVMH and Kering acquisitions)
— Private Equity Houses are still a strong investors
— Going public is becoming more popular in the Italian market (OVS, Italian Wine
Brands, Masi, Fope..)

50%
34%
23%
20%
11%
20%
5% 15%
7% 7%
5% 3%
2010-2013 2014-2017
Whatarethemostwantedcategories?
The story so far…
Main deals in 2014-2017
Yacht: Azimut-Benetti, Ferretti, Bertram
Retail: Yoox/Net-A-Porter, Eataly, Marchesi, Sempione Retail
Food&Beverage: Sella&Mosca, Grand Marnier, Masi, Jacopo Biondi
Design/Lifestyle1: Poltrona Frau, Giorgetti, Arclinea, FontanaArte,
Flos, Frette
Accessories2: Roger Vivier, Sergio Rossi, Buccellati, The Bridge,
Golden Goose
Apparel: Moncler, Versace, Cavalli, Dondup, Aspesi, Corneliani, Pal
Zileri, Harmont & Blaine, Champion Europe
N. deals by category
— Apparel is still the largest category, but declining in number of deals due to the
end of the French poles expansion period
— Few top brands still available in the market, mainly in the shoes and other
Accessories segments, which is expected to revert
2010-2013 2014-2017
100%=120 100%=132
Note: (1) Furniture, Lighting, Home accessories
(2) Shoes, Bags, Leather, Jewels & Watches, Cosmetics

HowmuchweretheaverageEBITDAmultiples?
EV/EBITDA average multiples in various sectors
The story so far…
— Fashion still represents the sector with the highest EV/EBITDA ratio
— Average Multiples are declining from the peak reached in 2011
— Multiples are just an indicator to understand if there is room for a deal
Source: Directory M&A 2016 - KPMG analysis on Fineurop Soditic data (2017)
Fashion
Food &
Beverage
Retail
Chains6.0x 6.0x
7.8x
8.0x
9.3x
8.6x
8.9x
5.4x 5.6x
14.7x 14.6x
11.3x
12.9x
11.2x
9.5x9.3x
8.7x
10.2x
10.2x
8.2x 8.1x
9.2x
7.7x 7.5x
6.6x 6.5x
8.5x
10.6x
8.2x
7.8x
7.1x
6.3x
6.8x
9.7x
8.9x
8.6x
5.9x
10.5x
7.4x
9.3x
9.7x
8.8x
4x
7x
10x
13x
16x
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

— More focus on long term value creation potential rather than on multiple value
— Investors are now focusing on smaller brands with high potential on the retail
channel and international expansion opportunities
— According to our interviews multiples will stay close double digit for the next few years
Year Target Bidder Stake
Value
(€m)
EV/
EBITDA
2014 Versace Blackstone 20% 210 15.7x
2014 Eataly Tamburi 20% 120 14.5x
2014 Poltrona Frau Haworth 100% 415 15.3x
2015 Hugo Boss Zignago Holding; PFC 7% 510 12.2x
2015 Cavalli Clessidra SGR 90% 390 20.9x
2015 Golden
Goose
Ergon (75%) Zignago
Holdings (25%)
100% 113 12.9x
2016 Corneliani Investcorp 51% n.a. 48.0x
2017 Golden
Goose
The Carlyle Group 100% 400 ~15.0x
Arehighmultiplesstillsustainable?
Although transaction tickets for the period 2014/2017 are lower in value
comparing to 2011/2013, largest assets are still trading at high multiples
The story so far…
Year Target Bidder Stake
Value
(€m)
EV/
EBITDA
2011 Bulgari LVMH 100% 4,300 28.7x
2011 Gruppo
COIN
BC
Partners
100% 930 6.4x
2011 Moncler Eurazeo 45% 418 10.5x
2011 Rinascente Central
Group
100% 205 11.0x
2012 Valentino Mayhoola 100% 700 31.6x
2012 Brioni Kering 100% 218 14.2x
2013 Loro Piana LVMH 80% 2,000 22.0x
2013 Pomellato Kering 75% n.a. 17.7x

…What'sNext?

Whataretheperceivedbarriersforacquisitions?
… What's next?
13%
14%
16%
28%
44%
Availability
of funds
High deal risk
Prices too high
Lack of
adequate skills
Fear of
losing control
Source: KPMG M&A Academy Survey - 2016 (around 200 firms with revenues > €50m)

Whicharealternativefinancinginstruments?
… What's next?
Yield
Debt size (€m)
Key issues
— Each financing solution comes with
very specific characteristics (e.g.
cost, minimum/maximum ticket,
covenants)
— Their availability depend on size,
level of indebtedness and brand
relevance of the Company
— CFOs of SMEs must find the right
financing mix to finance Company's
growth at a sustainable rate while
avoiding excessive financing costs
Although there are various options for Medium Enterprises looking for
alternative financing instruments, they cannot be used as a medicine to solve
company's structural problems…
Mezzanine
Unitranche
Minibond / Private Placement
Bank Debt
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
0 50 100 150 200 250 300 350

Whatareequityinvestorslookingforinadeal?
… What's next?
High-potential Brands Governance well defined
upfront
— PE houses act as system aggregators: entrepreneur, management team,
banks, external stakeholders, bringing finance competences and
relationship network…
Enlightened entrepreneur
(that knows where to go)
Scalable business model
for growth
"Shareholders must behave as
shareholders" (from being an
entrepreneur to a shareholder)
Strong Management team in a
structured organization

Whatarethekeyrequirementsforgrowth?
… What's next?
— Focus on a solid business model finding
the optimal balance among brand,
team, and creativity
— Pay greater attention to NEW
customers that have different needs
(millennials, product characteristics,
service level,…) and taste (style, image,..)
depending on the Country of origin
— Have a viable/credible growth plan
(e.g. retail expansion, e-commerce,
omnichannel, international scalability,…)
Structural problems in many cases
are due to some lack of managerial
skills or to an unclear vision of the
future development of the business…
Creativity Team
balance
Brand

WhataretherolesofthemajorityShareholder?
… and to an unhealthy overlap of Shareholders with Management
… What's next?
ENTREPRENEURS GUIDELINES
Act as a real Shareholder (e.g. Arnault, Pinaut,…):
— Delegate and avoid overlap with Management in day-to-day
decisions
— Respect the autonomy of your teams
— Measure the economic results
— Quickly take the proper countermeasures
Protect and develop the "history" of the brand with a
medium/long term view
Provide Management with support and resources to scale up to
the next level

New
managerial
competences
for growth are
required
Act as
a shareholder
Size is a
must
to compete
globally
KPMGView
Manage the
generational
change
Third party
financing is
useless if the
COMPANY
DEVELOPMENT
PLAN
is not clear
and robust
Large PE
houses provide
not only finance,
but competences
and network
for growth
UNLOCK VALUE TO ACCELERATE AND SUSTAIN GROWTH

Contacts
The contact at KPMG in connection
with this report is:
Maurizio Castello
Deal Advisory, Strategy
Head of Fashion & Luxury Practice
Partner, Milan, KPMG Advisory S.p.A.
Tel: + 02 6763 2682
mauriziocastello@kpmg.it

The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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© 2017 KPMG Advisory S.p.A., an Italian limited liability share capital company and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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