Italian Supply Chain Consolidation, M&A Expected to Continue

Jul 29, 2023

MILAN — Kering’s acquisition of a 30 percent stake in Valentino in July took the industry by surprise at a time when Italian entrepreneurs have begun to cozy up to one another like never before. This is aimed on the one hand at protecting the country’s unique manufacturing pipeline and on the other at trying to bulk up in the face of the ever-growing power of Europe’s luxury conglomerates.

In the case of the latter, the race is uphill for Italy’s fashion groups and the common view is that it is clearly too late to compete with the might of LVMH Moët Hennessy Louis Vuitton, Kering or Compagnie Financière Richemont, which also in July snapped up Italy’s Gianvito Rossi. However, in the former case, there are several successful — and unexpected — ventures.

The consensus is that this is only the beginning, since small and medium-size companies make up the majority of Italy’s 62,000 fashion firms, according to Confindustria Moda. They form the backbone of Made in Italy production, and a supply chain that works with the best luxury brands in the world. Entrepreneurs have realized it has become essential for the future of the industry to protect this pipeline and this is expected to involve more consolidation, more M&A activity, more nuanced partnerships and more efforts to map out common goals.

In 2021, in what was surely considered a major partnership, the Ermenegildo Zegna Group and Prada Group joined forces to acquire a majority stake in Filati Biagioli Modesto SpA, which specializes in the production of cashmere and other precious yarns. In June, the companies teamed again, buying a 15 percent stake each in knitwear and fine yarns specialist Luigi Fedeli e Figlio Srl. Both Zegna and Prada have over the years invested in building their pipelines and supply chains, as well as their own manufacturing plants in Italy.

In May, in the first such deal for Chanel and Brunello Cucinelli, the companies partnered on an acquisition of a 24.5 percent stake each in Italian cashmere manufacturer Cariaggi Lanificio SpA. This was a development in a deal that was signed last year by Cariaggi and Cucinelli, the latter’s first such merger and acquisition. At that time, Cucinelli revealed he was buying a 43 percent stake in Cariaggi, his longtime cashmere supplier. While Chanel over the years has been buying stakes in 40 suppliers, of which 15 are based in Italy, this is the first time it partnered with another established fashion brand.

While some fashion groups have been taking shape in Italy — such as Renzo Rosso’s OTB, through the acquisition of Marni, Maison Margiela and Jil Sander, for example, or the Moncler Group, with the addition of Stone Island in 2020, and Calzedonia Group taking control of the Antonio Marras brand last year — Gruppo Florence and MinervaHub are among the examples of new platforms to supply high-quality Made in Italy products to major luxury fashion brands. These platforms aim to leverage competitive prices, guarantee prompt and flexible deliveries and solutions, while safeguarding the technical and cultural know-how of small and medium-size family-owned Italian companies.

Gruppo Florence has grown over the past three years to control around 24 companies, from knitwear and informal outerwear manufacturers to footwear specialists, reaching sales of 600 million euros — and there are no signs it plans to stop here. The founding families of these companies have agreed to reinvest minority stakes in the holding.

In April, investment holding San Quirico SpA acquired a 75 percent stake in MinervaHub, emerging as a leading aggregator of small and medium-size makers of components for luxury brands, from chains and metal details to galvanic treatments and hand embroideries.

The remaining 25 percent stake remains in the hands of one of the sellers, Xenon Private Equity, with other coinvestors that include president Matteo Marzotto.

MinervaHub reports sales of more than 170 million euros, has a portfolio of more than 1,000 clients, of which are 20 among the main luxury brands, and 700-plus employees. In July it took control of 100 percent of New and Best H.F. Srl, known for its expertise in high-end leather goods, shoes, ready-to-wear and accessories, and surface finishings.

Likewise, more consolidation is expected in the country’s textile industry as entrepreneurs in the segment face market volatility, inflation’s impact on consumer confidence and mixed business in China and the U.S. Over the past few years, growing textile demand during the post-pandemic rebound and supply hiccups have hit the market, fueling competition and boosting prices for raw materials.

One example of consolidation in the textile industry came last December when Gruppo Piacenza SpA acquired patternmaking specialist Arte Tessile Snc, a little more than one month after taking over Lanificio Fratelli Cerruti. In 2020, Piacenza acquired Lanificio Piemontese, another Biella-based woolen mill, signaling its commitment to grow its manufacturing scope.

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