In November 2019, LVMH acquired Tiffany & Co. for $16.2 billion

Despite the coronavirus emergency, the luxury sector seems to remain highly appealing for international investors.

According to Deloitte’s “Global Fashion & Luxury Private Equity and Investors Survey 2020,” 70 percent of investors will continue to bank on the potential of the segment this year, with a focus on companies operating in the fashion and accessories categories, as well as in the beauty and digital luxury markets. In particular, the survey found 57 percent of the interviewed investors plan to make investments in disruptive technologies this year with a focus on IT services, big data and analytics, as well as artificial intelligence.

“In particular, digital luxury is a sector that will see great potential for investments next year, while the traditional store will evolve from a point of sales to a point of touch, stressing the importance of online commerce for the private equity world,” said Deloitte equity partner Elio Milantoni.

The survey highlighted that while the market for personal luxury goods will be less impacted by the COVID-19 crisis in the short term and is expected to grow 10 percent between 2019 and 2025, other luxury segments will be more significantly hit by the pandemic but are forecast to grow 20 percent by 2025.

Luxury hotels — the category that led the growth of the M&A business in 2019 — as well as cruises, watches and jewelry and furniture will be among the sectors more impacted by the crisis, according to Deloitte, especially in Europe and in the Americas, where sales are expected to be down between 30 and 40 percent. To accelerate their recovery, luxury companies are expected to focus on boosting online sales, marketing, digital promotion and sustainability.

Last year, 271 M&A operations were sealed in the luxury industry, six more than in 2018. Luxury hotels accounted for the lion’s share, representing 43 percent of total M&A in the overall luxury business. The electric automotive segment also grew, while that of personal luxury goods registered a decrease compared to 2018. The most active region in the luxury M&A business in 2019 was North America, while 55 percent of global deals were made by strategic investors.

According to Deloitte’s survey, global investors expect that, after the pandemic, Asia and the Middle East will be the regions recovering fastest and they also forecast a growth of the fashion and luxury business in those markets, while Europe and Latin America are seen as the most significantly affected by the crisis.

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