China'S Investors Are Eager To Buy European Brands.

Over the past five years, Chinese investors have grown increasingly interested in European traditional brands.

Shanghai Icicle Fashion Group began buying the Carven of bankrupt brand, while Fosun gained a majority stake in the long troubled Lanvin.

The most attractive factor for brands is their reputation, and they hope to get rid of the dilemma they are now experiencing by expanding their share and presence in the world's largest luxury market.

But not every deal is fruitful.

According to financial sources, Hongkong investment group First Heritage Brands acquired Sonia Rykiel in 2012, but after several cash injection and reorganization failed to rescue the brand, the group has started looking for new investors to control the brand, and has also hired Rothschild (Rothschild) to deal with the potential paction.

According to market news, the brand annual sales volume is about 30 million euros, significantly lower than the 84 million euro in 2011.

The company closed stores in New York, London and Luxemburg and tried to avoid bankruptcy proceedings.

Located in Shanghai, Gansu is an important jewelry distributor and gold mine owner.

It is reported that after the brand default on the loan, the company is looking for the buyer of Italy jeweler Buccellati.

Meanwhile, Shandong Ruyi has not yet completed the acquisition of Swiss luxury shoes and leather brand Bally from JAB Holding.

JAB Holding is an investment company based in Luxemburg, and the deal was signed in February 2018. It seems to be still at a standstill.

"Three or four years ago, Europe was the Golden State of Chinese investors.

The situation has changed, "said a banker who declined to be named. He noted that the new policy of the Chinese government is becoming an obstacle for Chinese investors to seek overseas investment.

Despite setbacks in policy changes, Chinese investors' enthusiasm for European fashion brands with cultural backgrounds has not stopped.

Martine Leherpeur is the founder of the Paris consulting company of the same name. 80% of her clients are Chinese.

She explained to us: "they (Chinese acquirers) are interested in brands of a certain size.

These brands have their own stories, which are very attractive to the main force of the Chinese consumers.

"The millennial generation of China is interested in three things: brand experience, tradition and quality."

Julie Laulusa, a French company's Mazars partner in mainland China, added.

Moreover, for many people, European fashion brands meet at least two of them.

In addition, there are many brands that need investment and are suffering from people who are not willing to accept the offer.

Large luxury groups are not interested in these pformation stories, while private Holdings Company are often skeptical when faced with troubled businesses.

But Chinese investors often have enough liquidity and are willing to take risks.

Pierre Mallevays, executive partner of Savigny Partners, a London based M & a consultancy, points out that there are currently two main types of investment pactions.

The first is strategic investment aimed at realizing the synergy effect of the existing portfolio.

The main cases of such pactions are: Shandong Ruyi (SMCP, Aquascutum, Gieves&Hawkes and Cerruti 1881); Icicle (Carven); and Gansu Gang Tai holding company (Buccellati).

Secondly, there are financial investments made by companies such as Lanvin (Caruso, St John Knits), Fortune Fountain Capital (Bacarat) and so on. The case also includes First Heritage Heritage.

In these two cases, investors want to use their knowledge of the local market to promote the sale of French brands in China.

Lanvin under Fosun has expansion plans in Asia, including two new stores in Shanghai and Hongkong at the end of 2019.

An exhibition plan on "New Lanvin" and its future and history opened at the Fosun foundation in Shanghai in early December.

"The millennial generation of China is interested in three things: brand experience, tradition and quality."

"As far as the retail network is concerned, I think (the Lanvin Jean-Philippe Hecquet, appointed in August 2018) will focus on developing major markets, including Europe and greater China," said Joann Cheng, chairman of Fosun fashion group and Lanvin, in the latest report on the global fashion format released by BoF and Mccann in October last year.

"Our vision of Lanvin is as clear as ever, and our vision is clear, and our products will be global," Hecquet stressed.

"We can see that the new direction of innovation proposed by Bruno Sialelli has been very positive in China and in Europe and the United States," he added.

Since its acquisition by Fung Brands in 2011, Delvaux has opened dozens of stores in Asia.

The Belgian luxury handbag brand will have 45 stores in the world by the end of this year, most of which are in Asia.

For strategic investors, European traditional brands can be crucial to the aura effect of their local portfolios.

"Since 2017, local brands are becoming more and more high-end, which is a potential trend," Laulusa said.

"Having an international brand in your portfolio will be very helpful."

A typical example: the clothing brand of Ho Ho fashion company has 260 stores in China. Its first clothing store opened on Paris Avenue in the second half of 2019 has gained credibility and prestige due to its linkage with Carven.

"The founder of Ye Shouzeng Icicle and Tao Xiaoma strongly believe (Carven) should continue the Paris spirit of the high fashion house," said Isabelle Capron, vice president of Wo fashion company.

The company's plan is to launch Carven in the selected wo Icicle store before redeploying the brand in Europe in 2021 and set up an independent Carven store in China.

Capron said that wo Icicle will be manufactured under the high-end equipment in China.

The executive refutes the argument that Carven may suffer from bad reputation related to manufacturing in China.

"These products will use very high quality fabrics.

We will talk about the quality of the product, "she said.

The establishment of the Icicle brand in Paris will lay the foundation for the quality of her "new China made" in her mouth and change the way people think.

"This is a win-win situation," Capron insisted.

"I think it's unfair for Chinese investors to only hope for a quick return on investment."

After the departure of Serge Ruffieux and CEO Sophie de Rougemont, the creative director and general manager of Carven have not yet been appointed.

"We are not in a hurry because we respect the DNA of the fashion house very much," Capron said.

Making the right management choices is crucial to success.

Chinese investors often do not participate in the daily operation of the brands they purchase.

Julie De Libran, the creative director of the former Sonia Rykiel, left the brand under the accusation of its refusal to perform the contract.

She said that although the Fung brothers support her work, it is far from enough.

"I don't think they want to participate in the management of the brand's micro level."

This is especially true when things are on the right track.

For example, when Shandong acquired SMCP in 2016, it still made Daniel Lalonde the CEO of the group.

Under his leadership, the group achieved annual sales of more than 1 billion euros last year, while its sales volume was 786 million yuan at the time of acquisition.

That is to say, when the right management is not in place, things will get tricky.

"They respect the brand very much. They know that there are some things they don't understand.

If they are not well prepared, they will not be able to find the right person in management and creativity. "

Leherpeur said she was often consulted on this matter.

"At present, in China, after the completion of the equity purchase paction, the pool of talents with operational experience is limited.

Most of the time, investors will be responsible for operation.

In this case, the results are usually not ideal, "Wang Xin added. He is the leader of IDG Capital's Gentle Monster and Acne Studio acquisition projects.

Some people say that Chinese investors are short of patience and expect quick returns.

When discussing the nature of the fast changing market, Wang Xin pointed out that this view is not everyone's agreement.

"With the rapid development of China's consumer market, good projects are also developing rapidly.

Therefore, I think it's unfair for Chinese investors to only hope for a quick return on investment, "he said.

"They are excellent strategist," Leherpeur said.

"They know which basket to put their eggs in."