Consumer Market Italy | M&A Trends | 2018 www.pwc.com/it Index Methodology & Glossary 4 Executive Summary 5 At a glance 6 Overview on Consumer multiples 9 Food 11 Beverages 16 Personal Care & Cosmetics 18 Fashion & Luxury 20 Furniture & Design 24 Specialty Retail 27 Leisure 30 Deals by geography 32 Value Creation in Deals 35 Data Analytics in Deals 37 Our 2018 Consumer credentials 38 Italian Consumer Deals Team 39 Contacts 40 Methodology Reported deals have been sourced from . Deals have been selected based on the date of announcement. Revenues and EBITDA have been sourced from the latest financial statements available on public databases (AIDA, Orbis, Cerved) and refer to the individual accounts (unconsolidated) of the target entity, except where otherwise stated. Revenues and EBITDA are available for 83% and 77% of the reported deals respectively. Deal value is not indicated since in most cases the data are not publicly available. Glossary Domestic deals are those with both Italian acquirer and target. Inbound deals involve a foreign acquirer and an Italian target. Outbound deals involve an Italian acquirer and a foreign target. Financial investors include Private Equity, SPAC (listed Special Purpose Acquisition Company), family offices, financial holdings and acquisitions made by Private Equity portfolio companies. Strategic investors include corporates, private investors and buy-backs. North-West includes Valle d’Aosta, Liguria, Lombardy, Piedmont. North-East includes Friuli-Venezia-Giulia, Trentino-Alto Adige, Veneto. Centre includes Emilia-Romagna, Lazio, Marche, Tuscany, Umbria. South & Islands include Abruzzo, Molise, Basilicata, Calabria, Campania, Apulia, Sardinia, Sicily. 4 Retail and Consumer M&A Trends | 2018 Executive Summary by Emanuela Pettenò Despite the fear of a slowdown in M&A activity, more than 200 deals (including 5 IPOs) have been announced in the Consumer segment in 2018 (vs. 178 in 2017) The Italian M&A Consumer arena hosted 202 transactions Despite clouds of recession, significant volumes of activity in 2018 (+13% vs. last year), with Food largely dominating are expected also in 2019, at least in the first semester, in terms of number of deals (60 - almost stable vs. 2017). with a few macro-trends driving market growth across all Financial investors were particularly active with 91 deals segments: announced in 2018 (vs. 54 in 2017), but with a lower average size compared to 2017 (average Target revenues • Sustainability is by far the most relevant and of €79m in 2018 vs. €115m in 2017). Corporate buyers pervasive trend impacting the overall industry from were more focused on the domestic market, leading to Food, Beverages and Cosmetics (fresh, organic/ a decrease in the number of Outbound transactions (20 bio, cruelty free) to Fashion (declining use of furs, in 2018 vs. 27 in 2017). 5 large cross border corporate inclusivity, “made in”), Furniture & Design (waste deals have been announced in 2018 including: recycle) and also adjacent segments like Packaging; • Innovation will be the key to attracting new • the acquisition of Nestle’s US confectionery customers, particularly Millennials and Gen Z. business by Ferrero for a deal value of €2.3bn; Brands have realised that, to extend their product • the public tender offer made Richemont to buy portfolio, investments in niche innovative companies a 75% share in Yoox Net-a-Porter Group delisting are an easier alternative to internal development. the company (€2.7bn investment and €3.4bn EV); This trend is currently driving large corporates’ • the acquisition of Gianni Versace by Capri Holdings investment in both emerging Fashion brands (Micheal Kors) for €1.8bn; and niche, highly innovative Cosmetics companies; • the 70% investment by Snaitech in Playtech • Value for money continues to be a mantra not at an EV of €0.8bn (for 100%); only for final customers but also for B2B producers • and the acquisition of the US Mars Drinks working with fashion and luxury brands; by Lavazza. • Lifestyle changes such as the increasing number The main deals announced by Private Equity of singles and working women is leading houses included: to a revolution in the most traditional segment of this industry (Food), with expectation of higher • the acquisition of Forno d’Asolo (frozen food) consumption of ready meals, frozen food by BC Partners; and a boost in food delivery. On the other side, ageing • the 41% investment by FSI in the fashion and growing attention to health and personal care will brand Missoni; polarise personal purchases vs. premium products; • the creation of the newco Design Holding where • Immediacy – E-commerce will be the sale channel Investindustrial and Carlyle contributed their with the highest growth potential across all segments. furniture and design portfolio companies Flos, B&B After Fashion and Food Delivery, Food, Cosmetics Italia and Louis Poulsen (acquired in July 2018); and Design have an almost untapped potential • the investments of OpCapita in the pizzeria chain to discover. RossoPomodoro and of Alpha in Calligaris (producer of high-end furniture). With this report we aim to provide an outlook on the deals dynamics in the Consumer space. 70 60 We sincerely hope this can be a valuable read and look 60 57 forward to 2019. 48 50 43 40 34 35 Emanuela Pettenò 29 Number of deals PwC Deals – Transaction Services Partner Italy 30 23 18 Consumer & Market Deals Leader 20 15 11 10 7 0 Food Fashion Specialty Furniture Beverages Personal & Luxury retail & design care & leisure & cosmetics FY 17 FY 18 5 At a glance 2018 vs. 2017 – Number of deals Number of deals by segment Food Beverages Personal care & Cosmetics 60 vs. 57 15 vs. 23 7 vs. 11 Fashion & Luxury Furniture & Design Specialty retail and Leisure 43 vs. 34 29 vs. 18 48 vs. 35 Compared to 2017 International features Domestic deals Inbound deals Outbound deals 118 vs. 91 64 vs. 58 20 vs. 29 Number of deals where Of which target revenues are… advised by PwC not public 38 n.a. >€500m 10 6 >€100m 24 6 €10-100m 96 14 <€10m 34 3 6 Retail and Consumer M&A Trends | 2018 At a glance 2018 vs. 2017 – Target and Bidder Number of deals by investor type Deals by target revenues and investor type Most relevant segments 55% 63% Strategic investors Strategic investors 111 vs. 124 vs. 53% 45% 37% Financial investors Financial investors 91 vs. 54 vs. 47% Deals by segment Deals by segment for strategic investors for financial investors Food 41 vs. 42 19 vs. 15 Beverages 9 vs. 20 6 vs. 3 Personal care vs. 5 vs. 6 & Cosmetics 5 2 Fashion & Luxury 20 vs. 22 23 vs. 12 Furniture & Design 7 vs. 14 22 vs. 4 Specialty retail vs. 21 vs. 14 and Leisure 29 19 7 8 Retail and Consumer M&A Trends | 2018 Overview on Consumer multiples by Alessandro Vitali Transaction multiples on Consumer deals were still Italian companies maintain their strong appeal high in 2018 to international investors Transactions occurring in 2018 confirmed the rising trend Inbound transactions recorded higher multiples in multiples, with a smoothed average EV/EBITDA ratio compared to outbound and domestic deals with average in the range of 9x-16x, however with a high variance EV/EBITDA multiples in the region of 18x, compared across sub-sectors and categories. to 15x and 11x respectively. The highest multiples were paid in the Cosmetics and Fashion segments (smoothed average of c.16x This reflects the strong appeal of Italian companies and 13x, respectively). On the other hand, lower and brands for international investors, based on the multiples were recorded in Beverages and Leisure quality of products, positive financial performances deals (c.9x). and the creativity and innovation of entrepreneurs. Strategic vs financial buyers Our expected trends for 2019 are an increase in the number of transactions in the Food and Strategic buyers are prepared to pay higher multiples Fashion segments, including adjacent segments compared to financial investors (average of c.17x vs. working on a B2B basis, such as ingredients, fabrics, 12x), leveraging on the long term view of the investment accessories, and turnaround situations, particularly and on the value attributable to operational in the fashion space, and a slight decline in multiples. and strategic synergies. Multiples are still discounted compared to the rest In this context, it is worth mentioning the multiple paid of Europe and this is another good reason encouraging by Michael Kors for the Versace deal which has been foreign investment. by far the highest in the sector, at c.41x and has been excluded from the calculation of the average. 2018 Transaction Multiples Smoothed Average 10x 20x 30x 40x 50x Methodological note Presented transaction multiples have Food 13.1x 9 deals been calculated by PwC as the ratio between Enterprise Value (EV) and 2017 EBITDA, based on the Beverages 2 deals 8.6x latest available public information. Both EV and EBITDA are sourced from publicly available information. Personal care 16.1x 2 deals & Cosmetics Please note that due to the lack of information on the EV for certain Fashion & Luxury 13.3x 10 deals deals, the presented analysis covers a sample of 34 transactions announced in 2018 (17% in terms of number Furniture & Design 12.3x 4 deals of deals, and 54% based on Target revenues) and should be considered as illustrative only. Spelcialty Retail 9.0x 7 deals Smoothed average has been calculated & Leisure as the average for each sub-sector excluding the highest and lowest (*) Calculated as the ratio between Enterprise Value (where disclosed) and 2017 EBITDA transaction multiple. 9 10 Retail and Consumer M&A Trends | 2018 Food by Elena Borghi and Alberto Zanatta Also for 2018, Food confirmed its attractiveness Baked goods segment recorded the highest number for M&A, with 60 deals announced in 2018 (vs.