Luxury M&A Slows but Investor Interest Remains High Amidst Customs Duty Concerns

Mergers and acquisitions within the fashion and high-end sectors have experienced a noticeable slowdown over the past two years, following a period of post-Covid recovery. Despite this deceleration and a challenging economic climate, the sector remarkably continues to attract the attention of nine out of ten investors looking towards 2025. A significant concern, however, has emerged among these potential investors: the escalating issue of customs duties. These key insights are drawn from Deloitte's forthcoming "Fashion & Luxury Private Equity and Investors Survey 2025," an extensive global report based on insights from 60 private equity investors and over 114 companies spanning various luxury segments, including Clothing & Accessories, Watches & Jewellery, Cosmetics & Fragrances, luxury automobiles, hotels, private jets, cruises, furnishings, yachts, and high-end restaurants.

The M&A activity in the high-end segment saw a decline in 2024, recording 308 deals compared to 333 in 2023, marking a decrease of 25 transactions year-on-year. Notable movements during this period included the acquisition of luxury platform YNAP by German e-commerce firm Mytheresa from Swiss luxury group Richemont, while a high-profile planned merger between US giants Capri (owner of Michael Kors) and Tapestry (owner of Coach) ultimately fell through. The first half of 2025 further confirms this general slowdown, with only 162 transactions recorded against 188 in the same period a year prior, representing a 14% drop. This period was marked by the significant acquisition of Versace by the Prada Group for €1.25 billion.

Within the luxury goods segment alone, which constitutes 40.2% of total transactions, the number of deals closed last year decreased by 6.3%. Breaking this down, clothing & accessories, traditionally the most attractive M&A sector, saw 85 transactions in 2024, a reduction of 20 from the previous year. Similarly, watches & jewellery registered 15 deals in 2024, down from 17. Cosmetics & fragrances, however, defied this trend, experiencing a substantial jump from 21 to 34 deals in one year, an increase of 13 transactions.

Beyond traditional luxury goods, the overall ranking for 2024 was led by luxury hotels, which recorded 145 transactions, an increase of one deal. Clothing & accessories maintained its position as a highly attractive industry despite a slight dip in numbers. Furnishings also showed strong growth with 23 deals, up by 10. In contrast, yachts and luxury automobiles each recorded 11 deals, but saw declines of 5 and 13 transactions respectively between 2023 and 2024.

Looking ahead to 2025, investor interest in the fashion and luxury sector remains robust despite a persistently uncertain macroeconomic and geopolitical landscape. Elio Milantoni, a partner at Deloitte, noted in a press release that 92% of funds are considering transactions in this sector, albeit with more caution than in previous years. He added that over half of these investors are now directing their strategies towards medium-sized companies, aiming to encourage sector consolidation. Concurrently, there is a discernible shift in investment preferences towards segments that complement the core fashion and luxury goods markets.

In terms of transaction size, the average value of M&A deals completed in 2024 stood at approximately €260 million, a slight decrease of 4% from 2023. This trend reinforces the growing interest in medium-sized transactions and targets. A significant concern identified by Deloitte's survey is the impact of customs duties, with eight out of ten investors believing this issue will negatively affect the market. North America (35%), Europe (33%), and Asia (29%) are perceived as the regions most susceptible to rising trade barriers.

Geographically, investors continue to view Europe as the region offering the greatest potential for luxury transactions, with 75% of respondents identifying it as such, followed by North America at 23%. This perception aligns with deal activity in 2024, where Europe accounted for the highest number of transactions at 210, an increase of 14 from 2023. In contrast, North America recorded only 54 deals, a decrease of 23, and Asia-Pacific saw just 33 transactions, down by 29.