FOKUS-Private equity convinces Italian luxury suppliers that bigger is better


Small Italian manufacturers of luxury products are joining forces


Investments of funds help to encourage consolidation


Larger groups can speed up the supply of customers


Also make it easy to prove your ESG credentials

Authors Elisa Anzolin and Valentina Za

MILAN, Jan 16 (Reuters) – Italian companies have discovered the limits of their “small is beautiful” motto as competition has gone global. Buoyed by private equity funds, those who supply the booming luxury goods industry are now finding strength in unity.

With its tradition of sophisticated craftsmanship, Italy is home to thousands of small producers who account for 50-55% of global luxury clothing and leather goods production, according to consultancy Bain, compared to 20-25% in the rest of Europe.

Mostly family-owned and small in size, these companies often struggle to meet the changing needs of the luxury brands they work for.

To respond to luxury buyers’ growing concerns about sustainability while ensuring on-time deliveries, brands seek to establish close ties with suppliers, who in turn require heavy investment to track where they source materials from and build a proper digital backbone.

Private equity funds, having run out of big brands to buy, have now grappled with the supply chain challenges of the luxury industry and turned to a “buy and build” strategy.

“Luxury brands are growing exponentially: our customers needed us to grow with them,” said Nicola Giuntini, whose Tuscany-based company makes luxury coats and jackets for brands including Celine, Burberry and Stella McCartney.

In 2020, the Giuntinis sold their company to VAM Investments – controlled by former Bulgari CEO Francesco Trapani – and two other Italian investment firms as they became part of the hub of luxury clothing manufacturers.

“By working together we can guarantee stable production levels and undertake projects that would otherwise be too expensive,” Giuntini said.


Private capital had a big say in shaping the Italian fashion industry. It accounts for 40% of transactions over the past ten years, including buyouts of Moncler, Versace, Roberto Cavalli and Ermenegildo Zegna, according to KPMG research.

The COVID-19 pandemic, with its resulting supply chain disruptions, was instrumental in convincing Italy’s baby-boomer business owners that the time was right to let outsiders into their closely held companies.

The Giuntini business is now part of Gruppo Florence, a center owned by funds and families that have sold their businesses and reinvested some of the proceeds.

The group currently includes 22 companies with total revenue of more than EUR 500 million ($542.00 million) and aims to reach 30 before launching a possible initial public offering.

It has since begun working with Bank of America and Citi to evaluate strategic options after attracting interest from investment firms including Carlyle and Permira, two people familiar with the matter said. All those involved declined to comment.

“There are no assets listed that would give investors exposure to the Made-in-Italy supply chain in the luxury sector,” VAM CEO Marco Piana told Reuters.

“This is one of the few sectors where being Italian is a competitive advantage: there is no other area where you have the same knowledge and experience when it comes to producing soft luxury products.”

Luciano Barbetta, whose clothing manufacturing company in southern Italy joined Gruppo Florence last year, said the hubs could help manufacturers make up for delays in raw material deliveries.

“Because there are several companies, we can help each other fill orders right on schedule. And it’s a good feeling to know that all the burden is not on your shoulders,” said Barbetta.


The Italian manufacturing sector has also been a hunting ground for large luxury brands looking to secure their supply chain.

Private equity investors and big fashion companies could potentially be competitors, but KPMG partner Stefano Cervo pointed to niches in the supply chain that are suitable for funds and less attractive to luxury conglomerates.

“It makes sense for a big brand to buy, say, a tannery specializing in rare leather, but I can hardly imagine that they would be interested in, for example, manufacturers of gold plating for chains or purse buttons,” he said.

“However, there is value to be created by bringing gold coating manufacturers together. Just from a sustainability perspective, the scale makes it easier to recycle production waste or reduce the carbon footprint.”

Italian private equity firm XENON International, for example, bet on the manufacturers of materials and finishes for luxury items that it grouped into MinervaHub.

The seven companies in its portfolio, which include manufacturers of metal accessories or surface finishing specialists, have total sales of 180 million euros, which MinervaHub wants to increase to 300 million while scrutinizing six more companies.

MinervaHub supports its businesses in legal and financial matters, as well as environmental, social and governance (ESG) issues, said XENON founder and CEO Franco Prestigiacomo.

That’s key in an industry that KPMG’s Cervo says has become “obsessed” with ESG.

“Vendors can be a huge reputational risk for brands,” said VAM’s Piana.

“In the world of social media, it’s too dangerous not to have full visibility into your supply chain.” ($1 = 0.9225 euros) (Reporting by Valentina Za and Elise Anzolin; Editing by Keith Weir and Susan Fenton)

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