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EMEA Fashion & Luxury market: Private Equity and

Investors Outlook 2016

2

i. EMEA Fashion & Luxury: Key Takeaways & Methodology Approach

ii. EMEA Fashion & Luxury: M&A Deal Monitor 2015

iii. EMEA Fashion & Luxury: Private Equity and Investors Survey 2016

iv. About Deloitte and Its Fashion & Luxury Practice

Contents

3

EMEA Fashion & Luxury: Key Takeaways (1/3)

• The "EMEA Fashion & Luxury market: Private Equity and Investors Outlook 2016” survey conducted

by Deloitte Financial Advisory analyzes the main trends that, according to the interviewed investors, are

expected to characterize the performance of this industry in 2016

• In general, prospects are very good for players in the Fashion & Luxury market; as a matter of fact, also

merger & acquisition deals show signs of recovery in all areas of the luxury goods industry that have

been studied

Fashion & Luxury M&A deals in 2015

• In 2015, 84 Merger & Acquisition transactions were carried out in the Fashion & Luxury industry,

accounting for 61% of global deals; the average value per deal was US$ 471 million in 2015

• Personal Luxury Goods were a major investment area, representing 50% of total transactions with an

average deal value of US$ 389 million

• Apparel & Accessories represented a major investment sector, accounting for 32% of total deals with

an estimated average value per deal of around US$ 300 million

• In 2015, the most significant acquisition transactions were carried out in the Hotels and Cosmetics &

Fragrances sectors, with an average value per deal higher than market average

• In 2015, 26 deals were finalized in the Hotels sector (30% of total deals) driven also by the strong

market growth recorded over the last few years (+12% CAGR 12-15); the Hotels sector recorded the highest

average value per deal in 2015, equaling US$ ~686M

4


Fashion & Luxury M&A deals in 2015 (cont.)

• The main countries that recorded the highest number of deals were the U.K. (24%), France (17%) and

Italy (15%), although with a different industry focus

• 20 deals were carried in the U.K., of which 40% in the Apparel & Accessories sector and 35% in the

Hotels sector

• 14 transactions were finalized in France, mainly in the Apparel & Accessories (50%) and Cosmetics &

Fragrances (30%) sectors

• 60% of the deals in Italy were carried out in the Apparel & Accessories sector, whereas over 60% of

total transactions took place in the Hotels sector in Spain

• Around 30% of the acquired companies reported sales above US$ 100 million, with 20% of them (i.e.

5.4% of all target companies) exceeding US$ 1B

• 53.6% of deals were executed by Financial Investors, of which 87% were Private Equity investors; the

remaining 46.4% of deals were carried out by Corporate investors operating in the Fashion & Luxury industry

• In 2015, the Seller was a Strategic (Corporate) Player in 70% of deals, of which 60% were closed with a

Financial Bidder (Private Equity investor)

• The main investment strategies were based on Growth Capital transactions (61%), mainly carried out

by Strategic Investors (51%), followed by Buyout deals (18%), mainly carried out by Private Equity funds

(80%)

• Most deals finalized in 2015 were majority transactions, except for the Watches & Jewelry sector, where

70% of the finalized deals concerned minority stakes

5


Fashion & Luxury Private Equity and Investors Outlook 2016

• Around 80% of survey respondents own assets in the Fashion & Luxury industry characterized by a

majority stake and an average duration below 5 years

• 54% of respondents forecast an increase of over 5% in the Fashion & Luxury market in 2016, driven by

the positive trends predicted in the following sectors: Cosmetics & Fragrances (on the increase according to

83% of investors, with 21% expecting a double-digit growth), Apparel & Accessories (66% of investors) and

Furniture (58% of investors).

• Investors forecast a decrease of over 20% in business expectations in the Watches & Jewelry, Yacht

and Private Jet sectors

• The geographies where growth is expected are the Asia-Pacific region (excluding Japan), the Middle

East and North America, whereas Europe and Japan should remain stable in 2016

• Investors with assets in the F&L industry anticipate increasing expectations in the Cosmetic &

Fragrances, Cars and Yacht sectors as well as in the entire European region

• In 2016, 87% of investors are expected to carry out new deals in the Fashion & Luxury industry.

Personal Luxury Goods will remain attractive thanks to higher growth performance and margins than the rest

of the industry

• 65% of investors anticipate acquiring a majority stake in the target organization, using mainly senior

debt to fund the transaction

• The average expected IRR is between 20 and 30 percentage points; exits from large-sized organizations

(in 34% of cases) are expected to yield the highest returns (i.e. > 20%)

• The highest returns are expected to be achieved by large-sized organizations; 35% of investors

projecting an IRR over 20% plan to buy organizations with sales higher than US$ 100M

6

EMEA Fashion & Luxury: Methodological Approach

Maincontents

Sources

Size of M&A deals in

2015 classified by sector

Analisys of target

company profiles

Analisys of investor

profiles

Analysis of the

characteristics of deals

carried out in EMEA

Analysis of the current

portfolio of assets

operating in the

reference market

Analysis of the main

guidelines implemented

with reference to the

existing portfolio to

create economic value

Analysis of the exit

strategies forecasted for

2016

Outlook and investment

strategies for 2016

News and reports from

major media providers

focused on M&A

activities (e.g. Thomson,

Merger Market, etc.)

Private Equity investors’

press releases

Company press releases

Online survey based on

CAWI (Computer

Assisted Web

Interviewing)

Interviews with

executives operating in

the PE sector

Apparel & Accessories

Watches & Jewelry

Cosmetics & Fragrances

Cars

Hotels

Furniture

Private Jets

Yachts

Cruises

The survey focuses on

the «Premium»

segments in the sector,

defined on the basis of

quantitative (e.g. price

point) and qualitative

(e.g. interviews with

industry experts)

parameters

M&A deal monitor PE & Investors survey Sectors covered

Market segments

EMEA scope

Geographicalfootprint

Primarydata level

General remarks

The EMEA Fashion &

Luxury market: Private

Equity and Investors

Outlook 2016 report

summarizes the results

of a survey conducted

by Deloitte on a global

scale that is scheduled

to be published in mid-

2016

The geographical

scope considered

comprises the following

regions: Europe, the

Middle East and Africa

7

i. EMEA Fashion & Luxury: Key Takeaways & Methodology approach

ii. EMEA Fashion & Luxury: M&A deal monitor 2015

iii. EMEA Fashion & Luxury: Private Equity and Investors survey 2016


Contents

8

EMEA Fashion & Luxury: Highlight on M&A 2015

(1) Deal finalized through the establishment of the Varenne newco

Overview by sector

Deal overview in the main countries

Relevant deals in 201584 deals (100%)

27 deals (32.1%)

10 deals (11.9%)

5 deals (6.0%)

26 deals (31.0%)

6 deals (7.1%)

4 deals (4.8%)

6 deals (7.1%)

Month Target Bidder Value B$

April

June

June

January

March

August

February

April

December

March

Coroin

Center Parcs

Douglas Holding

Pepe Jeans

The Net-A-Porter

Kew Green

Holdings

Hugo Boss

Roberto Cavalli

Kurt Geiger

LRG Holdings

Constellation

Hotels

Brookfield Ppty

Partners

CVC Capital

Partners

M1 Group

YOOX SpA

Metropark Hotels

Tamburi-Zignago

Holding

Clessidra1

Cinven Partners

Cerberus Capital

Management

~4,4

~3,7

~3,1

~1,0

~0,8

~0,6

~0,6

~0,4

~0,4

~0,3

Apparel &

Accessories

Watches &

JewelryYachts Furniture

Private

Jets

Cosmetics &

FragrancesEMEA Hotels

United Kingdom

Hotels35%

App&Acc

Others

Yachts

2015

100%

20%

35%

10%

20 deals

(24%)

Spain

2015

22%

56%

100%

22%

Hotels

App&Acc

Others

9 deals

(11%)

France

App&Acc

Cos&Fra

21%

50%

Others

2015

100%

29%14 deals

(17%)

Germany

Others

100%

29%

29%

43%

Hotels

2015

Cos&Fra

7 deals

(8%)

Italy

13 deals

(15%)

Rest of EMEA

21 deals

(25%)

App&Acc

Furniture

100%

62%

15%

23% Others

2015

48%

14%

100%

Others

2015

Hotels

Wat&Jew

14%

24%

Private

Jets

9

In 2015, the Fashion & Luxury industry recorded around 84 M&A deals, of

which 50% focused on Personal Luxury Goods and 31% on the Hotels sector

Size of the Main M&A Deals

Note: The analysis includes the main M&A deals finalized in the Fashion & Luxury industry during 2015, excluding IPOs; the analysis takes into consideration also transactions aimed at acquiring players in the Fashion & Luxury value chain as strategic suppliers and selective retailers;(1) The analysis does not include deals for the purchase of tangible assets (real estate)Source: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

26

10

27

Watches &

Jewelry

Cosmetics &

Fragrances

5

Apparel &

Accessories

64

Furniture

84

Personal

Luxury

Goods

Other

Luxury

markets

Total Fashion

& Luxury

Hotels1 Yachts

6

Private Jets

42

(50%)

42

(50%)

Breakdown

(%)32.1% 6.0% 11.9% 31.0% 7.1% 7.1% 4.8% 100.0%

• During 2015, 84 M&A transactions focused on the larger Fashion & Luxury sector were carried out in EMEA; 50% of

these deals involved Personal Luxury Goods (42 deals) companies

• With 27 deals, the Apparel & Accessories sector accounted for 32% of the M&A market in 2015

• The other luxury sectors, including hotels, accounted for 50% of the M&A market in 2015

• One third of the transactions carried out during the year refers to the Hotels sector, which was supported also by the

market growth (+11.5% CAGR 12-15)

• Deals were distributed as follows in the remaining sectors: Yachts 7.1% (6 deals), Furniture 7.1% (6 deals) and

Private Jets 4.8% (4 deals)

Key Findings

Number of deals in EMEA – breakdown by sector (# ; %)

10

Average Value of Main Deals by Sector

Note: The average deal value has been calculated excluding the transactions for which no specific condition details are available; the analysis excludes some deals which represented outliers; the reported values are a representative sample based on the available dataSource: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases

1855

686

146

296

660

Furniture

Avg. F&L

471M$

Avg. PLG

389M$

YachtsHotels Apparel &

Accessories

Cosmetics &

Fragrances

Watches

& Jewelry

• In 2015, the most sizable acquisition deals were finalized in the Hotels and Cosmetics & Fragrances sectors, with

an average value per deal above market average

• The average deal value in the Apparel & Accessories sector equaled US$ 296 million - i.e. 0.6 times the average

value of the whole Fashion & Luxury industry -, also as a result of the characteristics of the fashion industry, where

players are typically smaller-sized

In 2015, the average value per deal equaled US$ 471M; the most sizable deals

were finalized in the Hotels (US$ 686M) and Cosmetics & Fragrances (US$

660M) sectorsAverage value per deal in 2015 – breakdown by sector (M$)

Personal Luxury

Goods (PLG)

Other Luxury

markets

Key Findings

11

Main M&A Deals Broken Down by Country and Sector

Source: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

The main countries with the highest number of deals were the U.K. (24%),

France (17%), Italy (15%), Spain (11%) and Germany (8%); each country

shows a different industry mix

24% 17% 15% 11% 8% 6% 19%Country %

Distribution of deals across industries and countries in 2015 (# ; %)

60,0% 80,0%20,0%

20,0%

0,0%

40,0%

100,0%40,0%

100,0%

60,0%

0,0%

80,0%

13

UK Spain

20 14

ItalyFrance

9

Other

countries

16

1

8

1

8

2

Switzerland

5

1

1

2

Germany

2

1

1

7

1

5

2

21

2

1

2

2

1

7

1

1

1

2

1

1

7

1

7

2

1

4

1

Furniture

Private

Jets

Yachts

Cosmetics &

Fragrances

Watches &

Jewelry

Hotels

Apparel &

Accessories

Tot 84

4

6

6

26

10

5

27

Breakdown

12

Around 30% of the acquired companies reported sales above US$ 100 million,

with 20% of them (i.e.5.4% of all target companies) exceeding US$ 1B

Average Size of Target Companies (1/2)

Note: The analysis is based on a sample of target companies for which official turnover figures as at the end of FY 2014 were availableSource: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

5.4%

10.7%

10.7%

101-

250M$

33.9% 17.9%

501-

1.000M$

5.4%

16.1%

51-

100M$

251-

500M$

25-

50M$

<

25M$

>

1.000M$

Total Fashion

& Luxury

100.0%68% under US$ 100M

Distribution of target companies across revenue classes (%)

• In 2015, investments in the Fashion & Luxury industry were focused mainly on smaller-sized organizations:

68% of the target companies had a turnover below US$ 100 million

• Around 30% of the acquired companies reported sales above US$ 100 million

• Only 5.4% of the total number of deals involved organizations with sales exceeding US$ 1 billion

• The main ‘giant M&A deals’ in EMEA were as follows:

− Acquisition of Coroin (deal value ~4.4B US$) and Center Parcs (~3,7B US$) in the Hotels sector

− Acquisition of the Douglas perfumery chain by the CVC Capital Partners private equity fund (deal value

~3B US$)

− Acquisition of the Pepe Jeans brand (deal value ~1B US$) in the Apparel & Accessories sector

Key Findings

13

In 2015, the average turnover reported by the acquired companies equaled

US$ 454M, with peaks of US$ 643M in the Personal Luxury Goods market

Average Size of Target Companies (2/2)

Note: The analysis is based on a sample of target companies for which official turnover figures as at the end of FY 2014 were availableSource: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

Average turnover of the acquired companies by sector (M$)

344367

221236

363

782

Apparel &

Accessories

Cosmetics &

Fragrances

Watches

& Jewelry

YachtsHotels Private Jets

Avg. PLG

US$ 643M

Avg. F&L

US$ 454M

Furniture

Personal Luxury

Goods (PLG)

Other Luxury

markets

• The average turnover reported by the acquired companies equaled around US$ 454M, with peaks of US$ 643M

in the Personal Luxury Goods market alone

• Large-sized target companies were concentrated in the Apparel & Accessories (avg. US$ 782M) and Cosmetics

& Fragrances (avg. US$ 363M) sectors

Key Findings

14

53.6% of deals were executed by Financial Investors, of which 87% were

Private Equity investors; the remaining 46.4% of deals were carried out by

Corporate investors operating in the Fashion & Luxury industry

Bidder Profile: Financial & Strategic Investors

• In 2015, the main bidder in 53.6% of the executed deals was a Financial Investor, represented by a Private

Equity fund in 86.7% of cases

• 46.4% of transactions were carried out by Strategic Investors, of which 25.6% were corporate investors

operating in the Apparel & Accessories sector, 23.1% were investors operating in the Hotels business, and

10.3% specialized in the Yachts sector

• The large luxury goods groups finalized 4 major deals (10.3%)

25,6%

23,1%

10,3%

10,3%

7,7%

12,8%

10,3%

53,6%

46,4%

Yachts

Luxury Holdings

Cosmetics &

Fragrances

Other F&L sectors1

Other industries

Financial

investor

Strategic

investor

Apparel &

Accessories

Hotels

100.0%

Bidder type Bidder sector

100.0%

86,7%

6,7%

6,7%

53,6%

46,4%Strategic

investor

Bidder sector

Financial

investor

100.0%

Other investors

Real Estate

Venture Capital/

Private Equity

100.0%

Bidder type

Financial Investors Profile (%)

(1) The «other F&L sectors» category includes the Private Jets and Furniture sectorsSource: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

Strategic Investors Profile (%)

Key Findings

15

In 2015, 70% of the deals were executed by a Strategic (Corporate) Player on

the Seller side, of which 60% were closed in favor of a Financial (Private

Equity) Bidder

Source: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

M&A market by investor type (%)

• In 2015, 40% of the executed deals were «Strategic to Sponsor» transactions (34 deals); «Strategic to

Strategic» transactions accounted for around 30% of the M&A activities in the Fashion & Luxury industry

• Financial Sellers accounted for 30% of the deals closed mainly in favor of Strategic Bidders (around 60%)

Breakdown of the M&A Market by Investor Type

Sponsor to sponsor 11 (41%)

Strategic to Strategic 23 (40%)

Financial seller

27

Strategic seller

57

68%

Financial bidder

45

54%

Strategic bidder

39

32%

46%

Focus next chart

Key Findings

16

In 2015, the finalized deals were based either on a «Growth Capital» or a

«Buyout» strategy as underlying logic and were mainly aimed at the acquisition

of a majority stake

Main Investment Strategies of Bidders

Note: The reported figures reflect a representative sample based on available dataSource: Data from Merger Market, Thomson M&A, One Source, Mint Global and company press releases.

• In 2015, 60.7% of the deals carried out were based on a «Growth Capital» strategy as underlying logic, followed by a

«Buyout» strategy, which was adopted in 17.9% of all transactions and by 80% of Private Equity funds

• «Business Consolidation» strategies were used only in 11% of all deals and were mainly adopted by Strategic

Investors (around 90%)

• Overall, 74% of all finalized transactions resulted in the acquisition of a majority stake in the target company

• Bucking the general market trend, 67% of M&A transactions in the Watches & Jewelry sector were focused on

acquiring a minority stake in the target company

56%33%

100% 100% 100% 100%

74%

44%67%

24% 26%

76%

100%100%100%

YachtsCosmetics

&

Fragrances

100%

Total

Fashion

& Luxury

100%

Private

Jets

Furniture

100%

HotelsWatches

& Jewelry

100%100%

Apparel

&

Accessories

Majority

Minority60.7%

4.8%

1.2%

4.8%

17.9%

10.7% Buyout

Growth capital

Turnaround

Recapitalisation

Merger

Consolidation

% Financial

investor

49%

80%

11%

75%

100%

0%

Deal breakdown by investment strategy (%) Deal breakdown by sector and equity stake (%)

% of sample = 100

Key Findings

17

i. EMEA Fashion & Luxury: Key Takeaways & Methodology approach




Contents

Profile of Survey Respondents

19

92% of survey respondents are global Private Equity Funds, of which 51%

have assets between US$ 100 and 500 million

Profile of Investors Participating in the Survey (1/4)

(1) The «other investors» category includes: Family offices, Luxury Holding firms, Pension funds, Sovereign Wealth funds;Source: Deloitte survey

• 92% of the investors participating in the survey are Private Equity funds, of which 51% manage assets for a total value

between US$ 100 and 500 million and 24% have assets between US$ 500M and 1B. 15% of the funds in the survey

have total assets exceeding US$ 1 billion

• The top managers of Private Equity funds have been involved in the survey: Managing Directors & Partners (41.7%),

Directors & Principals (33.3%) and Investment Managers (16.7%)

12,1%

51,5%

21,2%

15,2%

92,1%

7,9%

Investor type

100.0%

Fund’s net

assets

Private

Equity

Other

investors1

100.0%

Profile of survey respondents (%)

> 1B€

500M –

1B€

100M –

500M€

< 100M€

Key Findings

8.3%

Other role

41.7%

33.3%

Director /

Principal

Managing

director /

Partner

16.7%

Investment

manager

20

Around 79% of investors have at least one Fashion & Luxury asset in their

investment portfolio, but only 27% of them say their AuM level is higher than

25%


(1) AuM is the acronym for “Assets Under Management”. Source: Deloitte survey

100.0%

High

(> 25% of AuM)

33.3%

40.0%

26.7%

Medium

(5-25% of AuM)

Portfolio focus on the F&L

industry

Low

(< 5% of AuM)1

78.9%21.1%

At least one F&L asset

in the investment portfolio

No F&L asset in the

investment portfolio

• Around 79% of respondents in EMEA say they manage at least one Fashion & Luxury asset in their


• Around 27% of investors say they specialize in Fashion & Luxury

Asset portfolio focus on the F&L industry (%)

Key findings

21

The sectors in which respondents say they have most of their F&L assets are:

Apparel & Accessories (76.7%), Furniture (53.3%), Watches & Jewelry (33.3%)

and Cosmetics & Fragrances (30%)


(1) The «other sectors» category includes: Cars, Hotels, Private Jets, Yachts and Cruises;Source: Deloitte survey

Furniture

53.3%

26.7%26.7%

Cosmetics &

Fragrances

Other F&L

sectors1

30.0%

Watches & Jewelry

33.3%

Apparel & Accessories

76.7%

Selective Retailing

• 77% of respondents who maintain they have at least one Fashion & Luxury asset in their portfolio concentrate

their investments in the Apparel & Accessories sector

• Among the remaining sectors, the ones in which respondents invest the most are as follows: Furniture

(53.3%), Watches & Jewelry (33.3%) and Cosmetics & Fragrances (30%)

• The analysis shows that investors are focused mainly on Personal Luxury Goods companies

Breakdown by investment sector of assets managed by investors (%)

(% of respondents =79)

Key findings

22

• 73% of the assets in the current portfolio of investors have a turnover below US$ 100 million

• 20% of the considered sample invests in medium-sized companies, whereas only 3.3% has stakes in large-

sized organizations

Investors maintain that in 73% of cases the Fashion & Luxury assets in their

portfolio have sales below US$ 100M$, whereas 20% of them own medium-

sized assets (companies with sales between US$ 100 and 250M$)


Source: Deloitte survey

100.0%3.3%

251 -

500M$

51 -

100M$

25 -

50M$

26.7%

<

25M$

23.3%

Total F&L

investors

>

500 M$

3.3%

101 -

250M$

20.0%

23.3%

Average turnover of Fashion & Luxury assets in investors’ portfolios (%)

73%

Key findings

(% of respondents =79)

2016 Market Outlook

24

• 70% of respondents maintain they have a majority stake in the Fashion & Luxury companies present in

their investment portfolio; this figure is in line with data concerning the number of finalized deals resulting in

the acquisition of a majority stake (74%) during 2015

• In most cases (66.7%), the average duration of Fashion & Luxury assets present in the current portfolio of

investors in EMEA is below 5 years

Around 80% of respondents own assets in the Fashion & Luxury industry

characterized by a majority stake and an average duration below 5 years

Features of the Current Fashion & Luxury Portfolio


Majority

70.0%

Minority

30.0%

> 5 years

< 5 years

33.3%66.7%

Equity stake and average duration of Fashion & Luxury assets (%)

No F&L assets in the


100.0%

78.9%

Investors with F&L

assets in their

portfolio

At least one F&L asset in

the investment portfolio

21.1%

Key Findings

25

54% of respondents forecast an increase of over 5% in the Fashion & Luxury

market in 2016. The best growth expectations are observed in the Personal

Luxury Goods and Furniture sectors.

2016 Fashion & Luxury Market Outlook by sector

Source: Deloitte Survey

43%

18% 23% 27%16%

29%

9%

15%

30%41% 48%

33%

42%50%

36%36%

57%

43%

62%

48% 45%45%

52%

35%20%

40% 48%

11%9%

8%21%

9%

100%

Furniture

100%100%

7%

100%

YachtsPrivate

Jets

7%

7%

100%

6%

Hotels

3%

Total F&L

market

6%

Cosmetics

&

Fragrances

6%

100%

Watches &

Jewelry

Apparel &

Accessories

3%

3%

Selective

Retailing

100% 100%100%

6%

Cruises

100% 100%

Cars

Strong

increase

(>10%)

Increase

(5-10%)

Decrease

(<0%)

Stable

(0-5%)

• 54% of all respondents forecast a growth in the Fashion & Luxury market during 2016; 11% of these

respondents predict the increase will exceed 10%

• According to over 50% of respondents, the Cosmetics & Fragrances, Furniture, Apparel & Accessories and

Cars sectors will grow by over 5%

• Some difficulties are expected in the Watches & Jewelry, Yachts, Private Jets, in which according to 43%,

27% and 23% of respondents, respectively, a negative trend will develop over the next year

Expected market trends in 2016 - breakdown by sector (%)

(% of respondents=95)

Key findings

66%Positive

sentiment49% 82% 52% 52% 45% 58% 35% 23% 48% 54%

26

Investors with assets in the F&L industry anticipate increasing expectations in

the Cosmetic & Fragrances, Cars and Yacht sectors

2016 Fashion & Luxury Market Outlook by Sector


44%

19% 21% 22%26%

35%36% 50% 40%

42%52%

39% 35%

56%

48%

69%

46%50%

45%44%

37% 22%

44% 50%

11%11%9%15%

15%11% 4%

100%100% 100%100%

4% 6%

100% 100%

5%

100%

8%

8%

100%100%

7%

100%

5%

100%

7%

38%

13% 13%29%

43%29%

38%

13%

13% 14%57%

43%

13%

43%

43%

29%

39%

63%25%

38%

57%

29%43%

75%

29%14%

29% 41%

25%38%

14% 14% 14% 11%

14%14%

Private

Jets

YachtsFurnitureHotels

100% 100%

Cars

100% 100%

Selective

Retailing

100%100%

Watches

&

Jewelry

Apparel &

Accessories

Cosmetics

&

Fragrances

100%100%100%

Cruises

100%

Total F&L

market

100%

8%

Investorswith assets

in the Fashion & Luxuryindustry

Investorsnot

operating in the Fashion & Luxuryindustry


+4Positive sentiment (2) +10 (25) +12 +3 (23) +8 +12 +7 +2

Strong increase (>10%) Decrease (<0%)Stable (0-5%)Increase (5-10%)

27

Asia, the Middle East and North America will be the main growth markets in

2016, driving the performance of the entire industry; the trend is expected to

remain mainly stable in Europe

2016 Fashion & Luxury Market Outlook by GeographicalArea


• European investors forecast a positive performance of geographical areas such as Asia, the Middle East and

North America in 2016; over 70% of respondents expect that growth will exceed 5% in these areas. The best

performances are expected in the Asian market and in the Middle East, where around 25% of respondents

predict a double-digit growth.

• The trend is expected to remain mainly stable in Europe

21% 19% 12%

49%

33%

31%

55%

12% 16% 41%36%

43%

58%

41%

26%

52% 50%

59% 48%

11%13%9%

22%24%9%

100% 100%

AsiaJapan

100%

Latin

America

North

America

Europe

100% 100%

7%

100% 100%

Rest Of

the World

100%

Middle

East

6%

Total F&L

market

Decrease

(<0%)

Increase

(5-10%)

Stable

(0-5%)

Strong

increase

(>10%)

Expected market trends in 2016 - breakdown by geographical area (%)

Key findings


28

Investors with assets in the F&L industry anticipate increasing expectations in

Europe

2016 Fashion & Luxury Market Outlook by GeographicalArea




Investorsnot



+39Positive sentiment

19% 17%

44%32%

33%

12% 21% 50% 35%

52%

56%38%

26%

56% 42%

50% 50%

12% 20% 25%

12% 11%13%

57%

100%

10%

North

America

100%

JapanLatin

America

100% 100%

Asia Total F&L

market

4%

100% 100%

Middle

East

Rest Of

the World

100%

4%

Europe

100%

Decrease

(<0%)

Stable

(0-5%)

Increase

(5-10%)

Strong

increase

(>10%)

63%

38%

25%50%

13%39%

13%

63%50%

25%

38%75%

86%41%

25% 25% 13%25% 14%13%

13%38%

100%

Middle

East

100%

AsiaJapan

100% 100%

North

America

100% 100%

Europe Latin

America

100%

Total F&L

market

Rest Of

the World

100%

8%

11%

Increase

(5-10%)

Stable

(0-5%)

Strong

increase

(>10%)

Decrease

(<0%)

+6 (2) +1 +1 (21) (36) +2

2016 Investment Strategy

30

In 2016, 87% of investors plan to carry out new transactions in the Fashion &

Luxury industry. Personal Luxury Goods will remain the most attractive target

thanks to higher growth performance and margins than the rest of the industry

Expected Investments in F&L in 2016 (1/2)


86.8%13.2%

No investments

in F&L

At least one

investment in F&L

• The respondents who plan to invest in the Fashion & Luxury industry in 2016 (87% of all

respondents) will focus on the Apparel & Accessories sector (75% of respondents)

• Strong investor interest also in the Cosmetics & Fragrances sector, where around 50% of the sample

plans to finalize at least one deal

• The main sectors expected to attract investments over the next year include Furniture, Selective

Retailing and Watches & Jewelry; the latter attracts a large number of investors from different

industries (other than F&L) who are attracted by the increase in sales and operating margins

characterizing this sector

78.8%

33.3%

18.2% 15.2%

48.5%39.4%

Other F&L

sectors 1

Furniture Selective

Retailing

Cosmetics &

Fragrances

Apparel &

Accessories

Watches

& Jewelry

Current

investor in

F&LNew investor in

F&L

Propensity to invest in Fashion & Luxury assets in 2016 and main target sectors (%)


85.0%

15.0%

81.8%

18.2%

85%

15%

81.8%

18.2%

66.7%

33,3%

80%

20%

Key findings

31

Propensity to invest in the various F&L sectors tends to be similar among

investors with or without assets in the F&L industry

Expected Investments in F&L in 2016 (2/2)


Propensity to invest in Fashion & Luxury assets in 2016 and main target sectors (%)



Investorsnot


81.5%

33.3%

14.8% 14.8%

48.1%40.7%

Other F&L sectors 1Furniture Selective

Retailing

Cosmetics &

Fragrances

Apparel &

Accessories

Watches & Jewelry

66.7%

33.3% 33.3%

16.7%

50.0%

33.3%

Other F&L sectors 1Furniture Selective

Retailing

Cosmetics &

Fragrances

Apparel &

Accessories

Watches & Jewelry


32

Investments in the Apparel & Accessories sector will target large-sized

organizations in 27% of cases, whereas deals in the other sectors will focus

mainly on mid-market companies

Size of Potential Investments in F&L


19%

67%

15% 9%

27%19%

38%

27%

75%

38% 31%

33%

31%

45%

25%15%

31% 9%

9%

Apparel &

Accessories

8%

8%4%

Selective Retailing Other F&L

Sectors 1

100% 100%100% 100%100% 100%

Furniture

8%8%

Watches & JewelryCosmetics &

Fragrances

101 - 250M$

< 25M$

51 - 100M$

25 - 50M4

251 - 500M$

500 - 1B$

• The survey shows an investor propensity to acquire large organizations in the Apparel & Accessories sector,

which will be the main target sector in EMEA during 2016; more specifically, 27% of respondents plan to

invest in companies with sales over US$ 100M

• 70% and 85% of respondents planning to carry out M&A deals in the Cosmetics & Fragrances and Furniture

sectors, respectively, will select small to medium-sized target companies with a turnover below US$ 100M

Average sales of potential target companies – breakdown by sector (%)


Key findings

33

Deal Characteristics: Financing Strategy

Vendor’s notes

or convertible

bonds

Mezzanine

financing

24%

79%

Other types 1Shareholders’

loan

45%

12%

Senior debt

27%

(1) The «other types» category includes: Junior Debt, Unitranche and Equity; Source: Deloitte survey

65.7% of respondents in EMEA say they will buy a stake greater than 40%,

using mainly senior debt to fund the transaction

Total

100.0%

> 60%

21.9%

21 - 40% 41 - 60%0 - 20%

18.8%

15.6%

43.8%


Equity stake to be acquired in the new asset (%) Funding sources (%)


• 65.7% of transactions will result in the acquisition of a stake of more than 40% in the target company

• Senior debt will be the main funding source for acquisition deals in the Fashion & Luxury industry in EMEA

• The other main funding sources mentioned by investors include also Shareholders’ loans (45%), Vendor’s notes

or convertible bonds (27%), and Mezzanine Financing (24%)

Key findings

34

Return Expected From New Investments (1/2)

27%19% 17%

46%

27%

60%

65%69%

67%

46%

64%

40%

8% 13% 17%8% 9%

Apparel

& Accessories

100% 100%

Cosmetics &

Fragrances

100%

> 30%

Furniture Selective retailing Other F&L

sectors 1

100%

21-30%

< 20%

100%100%

Watches

& Jewelry


The IRR expected from new investments in the Fashion & Luxury industry is

between 20% and 30%; large companies are expected to be those offering the

most profitable exits (average return >20%)

Internal Return Rate expected from new F&L investments – breakdown by sector (%)(% of respondents=100)

• On average, European investors expect the new investments in the Fashion & Luxury industry to have an IRR

between 21% and 30%. The best performing sector is expected to be Watches & Jewelry, for which around 20%

of respondents forecast an IRR greater than 30%

• The highest returns are expected from large-sized organizations; as a matter of fact, around 35% of investments

with an IRR above 20% will be made in companies with sales above US$ 100M

Key findings

35

The highest returns are expected from large-sized organizations; 35% of the

investors who forecast an IRR above 20% plan to invest in companies with

sales above US$ 100M

Return Expected From New Investments (2/2)


25%

75%

100%

50%

0%

40-0%

4.3%

30.3%

10.0%

< 20%

8.7%

26.1%

21.7%

> 20%

Expected IRR (%)

69.7%

21.7%

30.0%

Tu

rno

ve

r siz

e o

f ta

rge

t co

mp

an

y (

M$

)

20.0% 17.4%25 - 50M$

51 - 100M$

101 - 250M$

251 - 500M$

< 25M$

500 - 1B$

Internal Return Rate expected from new F&L investments – breakdown by target company size (%)


36

i. EMEA Fashion & Luxury: Key Takeaways




Contents

37

Deloitte EMEA Fashion & Luxury Center of Excellence

A Network of 65 cross-functional Subject Matter Experts (SME) with competence in the Fashion & Luxury industry able to suit

diverse client needs.

Countries involved

Main Objective

Cross-border cooperation to leverage on specific local expertise to deliver high level services to Fashion & Luxury clients and

targets across Europe.

• Core business transformation & Global retail Transformation

• CRM & Digital Transformation

• Marketing & Sales Strategy Operations

• Contract Risk and Compliance

• Risk Analytics

• Internal Controls

• Internal Audit Services

• Sustainability

• Corporate Finance Advisory

• Strategy & Business Planning

• Transaction Services

• Forensic

• Transfer prices – supply chain

• Custom duties/vat/logistic tax issues – supply chain

• Data privacy

• Personal planning for private family

Our Top Offerings

38

Deloitte - Contacts

EMEA Fashion & Luxury Leader

Patrizia Arienti

[email protected]

EMEA Country Leaders

France

Benedicte Sabadie

[email protected]

Germany

Karsten Hollasch

[email protected]

Italy

Patrizia Arienti

[email protected]

Spain

Victoria Lopez Tellez

[email protected]

Juan Jose Peso

[email protected]

Switzerland

Karine szegedi

[email protected]

The Netherlands

Victor Hoong

[email protected]

Turkey

Hakan Gol

[email protected]

UK

Nick Pope

[email protected]

France

Claire Deguerry

[email protected]

Germany

Karsten Hollasch

[email protected]

Italy

Elio Milantoni

[email protected]

Tommaso Nastasi

[email protected]

Spain

Roberto Martinez Roldan

[email protected]

Switzerland

Howard Da Silva

[email protected]

UK

Richard Lloyd-Owen

[email protected]

Mark Pacitti

[email protected]

Deloitte Fashion & Luxury Leaders Deloitte Financial Advisory contacts

mailto:[email protected]


















39

EMEA Fashion & Luxury: Glossary

Main Terms and Abbreviations

Personal Luxury

Goods

Personal Luxury Goods include the following

sectors: Apparel & Accessories, Cosmetics &

Fragrances and Watches & Jewelry

F&L Abbreviation for Fashion & Luxury

App&Acc Abbreviation for Apparel & Accessories

Cos&Fra Abbreviation for Cosmetics & Fragrances

Wat&Jew Abbreviation for Watches & Jewelry

PLG Acronym for Personal Luxury Goods

IRR Acronym for Internal Return Rate

PE Acronym for Private Equity

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loro entità correlate. DTTL e ciascuna delle sue member firm è un’entità giuridicamente separata e indipendente dalle altre. DTTL (descritta anche come “Deloitte Global”) non fornisce servizi ai

clienti. Si invita a leggere l’informativa completa relativa alla descrizione della struttura legale di Deloitte Touche Tohmatsu Limited e delle sue member firm all’indirizzo www.deloitte.com/about.

© 2016 Deloitte Touche Tohmatsu Limited

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