5. Kering x Mayhoola — ¿BFFs in the making?
Section 1. News Flash
Kering, the French luxury conglomerate headed by François-Henri Pinault, will acquire 30% of Valentino, the Italian luxury label founded in Rome in 1960 by Valentino Garavani (talk tan to moi), for a total of €1.7 billion in cash (~US$1.9 billion).
Yes; with a b.
Yes; in cash.
This acquisition includes a future option for Kering to acquire the totality of Valentino no later than 2028. This transaction is part of a broader strategic partnership between Kering and Mayhoola which is still developing.
The Kering Press release is available here.
Valentino’s current owner, Mayhoola, a Qatari investment fund with ties to the Qatari sovereign wealth fund, has experience in the luxury and fashion space as they own Balmain (Hi Olivier) and Paul Zileri, among other investments. Kering is the second-largest conglomerate in the luxury fashion industry measured by revenues.
Section 2. My view
This is a strategic move by Kering, based on the analysis of three key areas:
- The deal itself — is 30% of Valentino worth €1.7 billion?
- How does Valentino fit in the current Kering brand portfolio?
- What does this partnership between Kering and Mayhoola mean for the industry?
Lights out, and away we go.
1. The Deal:
30% of company ownership for €1.7 billion means the company was valued at €5.7 billion at the time of acquisition. In 2022, Valentino recorded revenues of €1.4 billion and an EBITDA of €350 million. This implies the following multiples:
- 4.1x Revenues
- 16.3x EBITDA
Magical math skills, I know.
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Contextualizing the numbers and looking at similar deals in the space, there are two comparable deals: the recent acquisition of Palm Angels (Italian streetwear brand led by Francesco Ragazzi) by New Guards Group (subsidiary of Farfetch, owner of a portfolio of fashion brands such as Off White & Heron Preston) and Moncler’s (luxury label known initially for its ski & winter apparel) acquisition of Stone Island (Italian menswear luxury brand known for its fabrics and streetwear appeal).
New Guards Group acquired Palm Angels in 2021 for €211 million and the following multiples:
- 1.4x Revenues
- 4.8x EBITDA
Moncler acquired 70% of Stone Island in 2020 valued at €1.15 billion and the following multiples:
- 4.9x Revenues
- 16.6x EBITDA
For additional context, 2021 was a better year for deals as a more favourable macroeconomic context implies larger valuations and multiples. This is not the case in 2023, where recession fears and rising interest rates put pressure on business valuations and therefore, multiples. With that said, it seems like the Valentino deal has not been cheap, especially compared to Palm Angels. Moreover, although it posts similar multiples to that of Stone Island, the economic context of the deal suggests the Valentino deal may have had some room for negotiating and lowering the valuation. Despite this, one could argue the Valentino brand and the market segment it operates in warrant the deal size; time will tell. So far, what we can say is that the valuation seems to be a large one.
2. Valentino fit in the Kering ecosystem
Valentino will now be part of the Kering brand portfolio, taking its place within Kering’s Couture and Leather Goods Houses. Kering controls strong brands such as Gucci, Balenciaga, Saint Laurent and Bottega Veneta so Valentino seems to be a natural fit. The meteoric successes of Gucci’s revamp under the Michele-Bizzarri tandem, Demna spearheading Balenciaga and Daniel Lee’s tenure at Bottega in recent years suggest that Kering as a parent company possesses organizational structures and capabilities that enable luxury fashion brands to achieve exponential growth and become culture-defining actors (Balenciaga Triple S sneakers anyone?). This is great news for Valentino as operating under this umbrella might allow the brand to develop this kind of business growth and cultural relevancy.
Pier Paolo Piccioli’s (aka PPP) understanding and development of the Valentino brand are undeniable (yes PPP more haute couture dresses please) and under the Kering structure, he will have all the elements necessary to thrive. Nonetheless, if PPP decides to continue creating magic elsewhere for whatever reason, Kering has also proven to have a knack for appointing the ‘right’ creatives to their brands to supercharge their growth. Some examples of this include Vaccarello at Saint Laurent apart from the aforementioned.
Valentino seems to be fit for the Kering ecosystem and stands to benefit from its new partial owner’s expertise. Thus, all seems to indicate that Valentino is in a better position for growth due to this acquisition.
3. Kering x Mayhoola significance for the fashion industry
Kering’s 30% acquisition is part of a broader strategic alliance that could see Mayhoola becoming a future shareholder in Kering, according to Kering’s press release.
Mayhoola, a Qatari investment fund with ties to its nation’s sovereign wealth fund could signify an important capital injection to Kering, which would allow the group to purchase more Maison’s, pursue more aggressive strategies with its current brand portfolio or a healthy mixture of both. This could see the landscape of mergers and brand relevancy skew towards Kering’s favour, placing some pressure on LVMH.
Mayhoola also brings regional contacts into the mix. Being a relevant entity in the region with ties to the national sovereign wealth fund means that Kering could potentially enjoy some leverage to develop its brands in the region.
Nonetheless, it is important to note that there could be cultural differences between the two organizations, leading to difficulties in coordination and ultimately hampering the efforts to actualize synergistic potentiality.
Overall, it seems that Valentino, although it fits in nicely within the Kering family, was not a cheap acquisition by any means, and although the prospects of further Mayhoola x Kering partnerships are interesting, success is not assured.
Written by Andrés Gonzales, edited by Livia Greene.
