The Fashion Law reports that a growing number of M&A deals and investment rounds are bringing together some of the biggest names in the fashion and luxury space. In November 2021, $1.15 billion brought Cartier's parent company Richemont, Chinese e-commerce titan Alibaba, and fashion retail platform Farfetch together. Meanwhile, LVMH Moët Hennessy Louis Vuitton decided to acquire Tiffany & Co. around the same time.
While many brands have decided to merge, either because of the effects of the COVID-19 pandemic or capital restrictions, they should ensure that risks are managed. Mergers and acquisitions are presented as great options, but companies must undertake thorough due diligence to assess the legal, reputational, and financial risks.
Consumer perception and acceptance of mergers of luxury brands may be the biggest risk posed. A loyal consumer may be upset due to a merger with their chosen brand, especially if the two merging entities were once competitors. Local brands considering mergers will need to ensure compliance with regulatory bodies like the Competition Commission and the takeover regulation panel before entering into mergers or acquisitions, as non-compliance penalties could potentially sink a deal.
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