Global M&A appetite for Luxury

GlobalM&Aappetite
forLuxury
Maurizio Castello, KPMG Advisory Partner
Il Sole 24 Ore - 10th Luxury Summit
Milano, June 20th, 2018

2© 2018 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.
MainTopics
Where are the most
wanted Targets
geographically located?
1
Are high multiples in the
market still sustainable?
Which are the most
wanted categories?
How strong is the
appetite of Italian F&L
companies for growth
through M&A?
Who are the main
buyers and what is
their evolution?
2
5
3
4

— LVMH/Christian Dior Couture
— Richemont/Yoox Net-A-Porter
— Coach|Tapestry/Kate Spade & Co
— Michael Kors/Jimmy Choo
— LVMH/Rimowa
— JD.com/Farfetch
— Carlyle/Supreme
— Gansu Gangtai/Buccellati
— Hanesbrands/Champion Europe
— Philipp Plein/Billionaire
— CVC Capital/Breitling
— Progressio/Forest (Save the Duck)
— SMCP (IPO)
163 152
36
36 54
14
62
73
19
19
19
5
2016 2017 1Q 2018
WherearethemostwantedTargetslocated?
Main deals 2016-1Q2018 (Buyer/Target)
Europe
(excl. Italy)
USA
Italy
Japan
280
Target by Region (#)
298
74
— 652 Fashion & Luxury deals were completed from Jan 2016 to March 2018 (worldwide)
— Europe is by far the most attractive market followed by US
— The deals in Italy have accounted for 18% in 2017 and 1Q 2018
Source: KPMG Advisory Italy research

170 175 46
100 104 24
8 18 42 1
2016 2017 1Q 2018
Whoarethemainbuyers?
Main buyers in 2016-1st Q2018N. global deals by investor type
Sovereign funds & Emirates investors: Alabbar, Mayhoola,
Temasek
IPO: SMCP, Culti, Fope, Mavi Jeans
Private Equity and other financial investors: 21 Investimenti, Carlyle,
Fosun, Investcorp, Investindustrial, L Catterton, Progressio
Corporate: LVMH, Tod's, Yoox Net-A-Porter, Campari, Richemont
— Corporates are maintaining the leadership, but PE houses and other financial investors are
growing faster.
— The Chinese Fosun with 4 deals has been the most active PE house
— IPOs significantly increased in 2017
100%=280 100%=298 100%=74

42% 46% 46%
22% 18% 18%
11% 13% 15%
8% 9%
12%
9% 5%
4%
6% 9% 5%1% <1%
2016 2017 1Q 2018
Whicharethemostwantedcategories?
Main targets in 2016 - 1Q 2018
Yachts: Fairline Boats, Privilege Marine
Food&Beverage: Freixenet, Patron Spirits
Jewels & Watches: Breitling, Buccellati
Lifestyle: Venini, Zanotta
Accessories: Bally, Golden Goose, Jimmy Choo, Kate Spade
Retail: YOOX, Farfetch, Coin, Limoni/La gardenia
Apparel: Supreme, Aspesi, Balmain, Corneliani, Pal Zileri
— Apparel is still the largest category, followed by Retail and Accessories
— The number of deals is increasing in Apparel, Accessories, and Lifestyle
100%=280 100%=298 100%=74
Global Targets by Category (#)

34%
9%
20%
20%
3%
13%
1%47%
18%
13%
5%
7%
9%
1%
70%
9%
9%
3%
9%
USA
100%=154
44%
25%
10%
8%
7%
5%
1%
Mostwantedcategoriesbygeography(2016-1Q2018)
— Apparel is still the most attractive product category in all the Regions, followed by Retail mainly
in Europe and US
— In Italy, Accessories and Lifestyle are the second largest Target categories
Europe
(excl. Italy)
100%=351
Japan
100%=43
Italy
100%=104

13 15
20
14
19 22
29
11
12 9
18
15 7
14
25
3
2011 2012 2013 2014 2015 2016 2017 1Q 2018
Italianfirmsarestillveryappealing
Numbers of F&L deals in Italy
— 256 Fashion & Luxury deals completed from 2011 to 1st Q 2018, of which 104 from 2016
— Foreign investors are still very active (around 40% of total 2016-1Q 2018 deals)
— Richemont/Yoox Net-A-Porter
— Carlyle/Golden Goose
— Gansu Gangtai/Buccellati
— Hanesbrands/Champion Europe
— Philipp Plein/Billionaire
— Progressio/Forest (Save the Duck)
— 21 Investimenti/Philippe Model
— Missoni/Fondo Strategico Italiano (June 2018)
— Canepa/Dea Capital (May 2018)
Main deals 2016-1st Q 2018 (Buyer/Target)
Italy Italy
Abroad  Italy
25 24
38
39
26
36
54
14
104 deals

Arehighmultiplesstillsustainable?
Year Target Bidder Stake Deal Value (€m) EV/EBITDA
2017 Jimmy Choo Michael Kors 100% 1,158 ~17.1x
2017 Golden Goose The Carlyle Group 100% 440 ~14.8x
2016 Tumi Samsonite 100% 1,573 ~14.7x
2016 Kurt Geiger Cinven 100% 340 ~13.6x
2017 Kate Spade Tapestry/Coach 75% 2,144 ~9.9x
2017 Christian Dior Couture LVMH 26% 6,500* ~15.6x*
2016 Balmain Mayhoola >50% 485 ~13.8x
2016 Aspesi Armonia SGR >50% 71 ~11.1x
(*) Data referred to Christian Dior Couture’s EV, which implies a 15.6x EBITDA multiple
Accessories
Apparel
EBITDA Multiples are high, but not at the level of some big M&A operations completed before 2016
31.6x
EV/EBITDA (2012)
Mayhoola/Valentino
28.7x
EV/EBITDA (2011)
LVMH/Bulgari
22.0x
EV/EBITDA (2013)
LVMH/Loro Piana

Howstrongisthe
appetiteofItalianF&L
companiesforgrowth
throughM&A?

4%
38%
58%
100%
Don't know No Yes Respondents
11%
5%
6%
10%
14%
15%
17%
23%
Other
Furniture
Watches
Jewels
Bags
Accessories
Shoes
Clothing
What is your Company's business?
SurveyconductedbyKPMGinItaly
KPMG reached out to +150 executives in the Fashion and luxury segment and investigated the M&A appetite
Do you think your Company will undertake/undergo
extraordinary financial operations in the next 3
years?
(*) Other: Retail, Beauty, Hotels, Bars, Stationery, Yachts, Fabrics, Luxury
Source: KPMG Advisory Italy research on 67 respondents - May 2018
*

3%
5%
7%
11%
11%
12%
12%
13%
28%
Exit
Other
Synergies' exploitation
Improve operations/Reduce time to market
New brand acquisition
Refinancing
Working capital financing
New products or service level
Geographical expansion
Surveyresults–Thereasonwhy
What will be the main driver/s of extraordinary finance operations?
F&L executives expect geographical expansion to be the main reason for future M&A, followed by
product/services diversification
Source: May 2018 KPMG Advisory Italy research on 67 respondents
24%
18%
52%
Expansion
projects
Finance
needs
Operations'
improvements

15%
29%
56%
Decreasing
Growing
Stable
2%
10%
15%
22%
51%
Merger
Listing
Restructuring
Partnership/Joint-Venture
Acquisition/Sale
Surveyresults–Typeofdealsandtrends
— M&A will continue, but at a slower pace than in the past
— Acquisitions, Joint Ventures and Partnerships will be the most common type of deals
Source: May 2018 KPMG Advisory Italy research on 67 respondents
What is your perception about the appetite for M&A
operations in the F&L sector in the next 3 years?
What kind of operation would your Company
choose/evaluate?

M&A
Partnership
IPOM&A
Joint Venture
SurveyResults–Quotes
Source: Selected interviews conducted by KPMG
"The big consolidation period in the
luxury industry is eventually over.
In the past, smaller companies were
acquired by larger groups to unlock their
value and scale their products abroad.
Today buyers need new M&A
paradigms (e.g. customer proximity,
sustainability, digital presence and
omnichannel capabilities)"
CEO, Textile
"We are looking for M&A targets
to be integrated in our value chain
both horizontally (product offering
extension) and vertically (upstream)
CEO, Textile
We develop partnerships with innovative
companies to embed technological
features in our products
CEO, Accessories
We estabilish JVs with technological
partners that can develop our own ideas
and increase the success of the
execution
CEO, Accessories
As a succesful completion of our growth
journey we would like to go public, not
only for raising money, but also for
enhancing our brand image and reputation
CEO, Women’s luxury coats

KeypillarsforsuccessfulM&A
Key KPMG Learnings for successful M&A operations and smooth post-deal integration:
THINK CREATIVELY ABOUT ROI AND
MULTIPLES
Do not miss the big picture: acquiring a certain
firm can make a big difference to your company's
image, competitive landscape, internal culture,…
THINK ABOUT THE EXECUTION
Some companies acquire a business only
to realize later that they have limited
experience with it
DO NOT TAKE GROWTH FOR GRANTED
Many companies have been content to grow
with the economy, but this may not be enough
for their shareholders
KNOW YOURSELF
Be realistic about how you will manage an
acquisition (people, facilities, products,…)
BE FAST IN TAKING CONTROL
Secure business as usual to protect the
deal value with a robust integration plan
BE ADAPTABLE
Countries have different business
models (e.g. Chinese business leaders
are often more interested in JVs or
partnerships than outright acquisitions)
RESPECT LOCAL KNOWLEDGE
Consumer goods companies think globally,
consumers don't !!!

Conclusions
- Europe, with 350+ deals in 2016-1Q 2018, is the major hub for M&A operations in the F&L
- Italy is a key market in the sector, with 100+ deals from 2016 to 1Q 2018, of which 40% from
foreign investors
- Apparel is the most wanted category in the world
- In Italy, accessories and lifestyle are the second largest categories impacted by M&A
- PE funds and other financial investors backed acquisitions increased faster than Corporate ones
- IPOs are increasing significantly
- EBITDA multiples are still high in the F&L segment, but far behind the peaks of the 2011-2013
period
- Most of the respondent F&L executives expect M&A market to stabilize in the next three years
- Expansion projects are expected to be the main drivers for acquisitions
- Partnerships and JVs might fuel the market to embed high-tech features into the products

© 2018 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.
Contacts
The contacts at KPMG in connection with this report are:
Maurizio Castello
Deal Advisory, Head of Fashion & Luxury products
Partner, Milan, KPMG Advisory S.p.A.
Tel: +39 02 6763 3809
mauriziocastello@kpmg.it

Basis of preparation and disclaimer
This presentation has been prepared by KPMG. This presentation is incomplete without reference to and should be viewed solely in
conjunction with the oral briefing provided by KPMG. In preparing the presentation and briefing, KPMG has based itself and relied on
publicly available information or information received from third parties and/or in any event inferred from acts and/or facts of which it is
aware. The information contained in this presentation is of general nature and is not intended to address the circumstances of any
particular individual or entity. Although KPMG endeavours to provide accurate and timely information, there can be no guarantee that
such information is accurate as of the date it is received or that it will continue to be accurate in the future.
No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
This presentation, and the information contained herein, can be used solely by the Recipient. In receiving the presentation, the Recipient
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investment recommendation or invitation.
KPMG accepts no responsibility or liability to any party in connection with the information or views expressed in this
presentation.
KPMG analysis are based on public sources, KPMG survey and interviews

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independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
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