In 2018, The Luxury Market Welcomed The M & A Boom, And European Trading Volume Led The World.

On July 26th, DDT released the 2019 global fashion and luxury industry private equity fund and investor Research Report (English version only), a thorough analysis of the development trend and the current situation of the luxury market, and pointed out that global investors must face the reality. Investors interested in fashion and luxury goods industry need to adapt to the current situation.

In 2018, the total number of M & A transactions in the luxury goods market was 265, representing a strong increase of 22% over the previous year.

Luxury hotels have become the main engines of mergers and acquisitions, with a total volume of 75 transactions worldwide (29 more than in 2017).

Mergers and acquisitions related to leading individual luxury multinationals showed an increase, mainly in cosmetics and fragrances, while 57% in clothing and accessories, watches and jewellery.

European M & A transactions grew strongly (increased by 41), while North America and the Asia Pacific region remained stable.

Investors expect the outlook for Asia and the Middle East to be optimistic in 2019, and the North American market is also looking up.

According to reports, Zhang Tianbing, the managing partner of DDT Asia Pacific consumer goods and retail industry, said: "luxury industry is still a hot investment area this year, and the volume of M & A transactions increased significantly by 47 compared with 2018. It is worth noting that the volume of mergers and acquisitions in cosmetics and fragrances and hotels has grown strongly, becoming the most popular area of global investors in 2018. According to DDT research, 70% of the surveyed funds said they would invest in luxury market in the next few years. Investors predict that in the next three years, Asia and the Middle East will be expected to become the main areas to promote industrial growth. "

"Due to the rapid warming of China's electric vehicle market, there were only mergers and acquisitions in the luxury car market in China in the 2018 years. In terms of transaction volume, mergers and acquisitions in the automotive industry ranked first, with an average transaction volume of US $945 million, an increase of 561% over the same period last year.

In addition, "cosmetics and perfume" and "clothing and accessories" are the core investment areas of luxury goods industry in the coming year, highlighting the importance of personal luxury goods to private equity funds.

　　 2018 mergers and acquisitions insight: Luxury Hotels promote M & A transactions

In 2018, the luxury market's M & A activity reappeared. The total number of mergers and acquisitions in the year reached 265, an increase of 47 over the previous year.

The growth of M & A transactions in the personal luxury sector (11 growth over 2017) was mainly driven by the cosmetics and perfume industry (44 in 2018, 17% of the total). Clothing and accessories (28% of the total) and watches and jewellery (11% of the total) decreased by four and one respectively compared with last year.

Western market M & A activities increased significantly: in 2018, only the European fashion and luxury industry M & A activities increased significantly (an increase of 41); Japan and the Asia Pacific region increased by two compared with last year alone. In 2018, Luxury Hotel M & A activities spread in major regions of the world, and luxury hotels became the main force to promote the growth of global M & A transactions. In addition, a large number of M & A activities have been carried out in the field of clothing and accessories.

Strategic investors led the M & A activities in 2018, and the total volume of transactions increased by 42 compared with 2017, mainly in clothing and accessories and hotels. Financial investors took part in 44% M & A transactions, and the total volume of transactions increased by five compared with last year. Most of the financial investors involved in mergers and acquisitions are private equity funds and venture capital institutions.

　 Investors are optimistic about the outlook for the future: the average annual growth rate of the luxury goods market will be 5% to 10%.

In the survey of fashion and luxury private equity funds, DDT focused on investors' views on the future growth prospects of fashion and luxury goods market. Respondents generally believed that the sales index of major enterprises in the field of personal luxury goods is expected to reach 1.1 times that of 2018 in 2021 (the compound annual growth rate of 2018 to 2021 fiscal year increased by 4%), while that of other luxury goods is expected to be 1.2 times (2018 to 2021 fiscal year compound annual growth rate of 6%).

The survey also shows that market investors believe that the fashion and luxury goods industry will maintain an average annual growth rate of 5% to 10% over the next three years, consistent with the 2018 forecast. Cosmetics and fragrances, furniture and luxury digital products may be the best performing areas, with a growth rate of over 10%. Clothing and accessories, and outdoor experience areas including luxury hotels and restaurants may slow down, but will still maintain 5% to 10% growth rate, and is expected to continue to maintain an upward trend in the next few years. Watches and jewellery, yachts and boutique retail will maintain steady growth. On the contrary, investors predict that the growth rate of the automobile and private aircraft market may slow down.

Investors believe that Asia and the Middle East may stimulate industry growth in the next three years, and the average annual growth rate is expected to exceed 10%. Industry development in North America may be limited, while European, Latin American and Japanese markets will have stable investment.

　　 The luxury industry is increasingly enthusiastic about investment.

DDT research found that 70% of the surveyed funds plan to invest in the luxury market in the next few years (down 19 percentage points from 2018). Clothing and accessories, cosmetics and fragrances are the most popular investment areas this year (79% of respondents plan to invest in these two areas), followed by furniture (57%), watches and jewellery (36%), and boutique retail (29%).