In September 2018, rumors began to circulate that Donatella Versace, the creative director and vice president of the Versace fashion house, was considering selling the company. The news came as a surprise to many in the fashion industry, as Versace has been a family-owned business since its inception in 1978.
The Potential Sale
Rumors of a sale: Reports surfaced that the Italian fashion house had hired investment bank Goldman Sachs to explore potential buyers for the brand. It was speculated that Versace was looking for a sale price of around $2 billion.
Denial from Donatella: Donatella Versace initially denied the rumors of an impending sale, stating that she had no intention of selling the company. In an interview with The Economist, she said, “I am not going to sell my company.” She also added that she was focused on increasing the company’s profitability and expanding its global presence.
The Reasoning Behind the Sale
Financial struggles: Despite Denial from Donatella, it was reported that the luxury brand had been facing financial difficulties in recent years. The company’s revenues had declined steadily since 2016 due to decreasing demand in key markets such as China and Russia. It was also reported that Versace was struggling to keep up with its competitors in terms of digital innovation and online sales.
Need for investment: Many experts believe that a sale would have allowed Versace to secure much-needed investment to help revitalize their brand and compete more effectively with rivals such as Gucci and Prada.
The Outcome
The sale goes through: In September 2018, it was announced that Michael Kors Holdings Ltd., now renamed Capri Holdings Limited (NYSE:CPRI), had agreed to acquire all outstanding shares of Versace for a total of $2.1 billion. The deal represented a significant premium over the company’s estimated valuation.
Donatella remains involved: Following the acquisition, Donatella Versace was appointed as creative director of Versace, while her brother Santo remained as CEO. Michael Kors CEO John Idol stated that the company had no plans to make significant changes to the brand’s image or creative direction.
The Bottom Line
The sale of Versace to Michael Kors Holdings Ltd. marked the end of an era for the Italian fashion house. While some fans were disappointed by the news, others saw it as an opportunity for Versace to reinvent itself and regain its position as one of fashion’s most iconic brands.
As with any major business decision, there were both pros and cons to the sale of Versace. However, it seems that Donatella and her team made the right call in selling to Michael Kors Holdings Ltd., as they have been able to secure much-needed investment while retaining control over the brand’s creative direction and image. Only time will tell whether this move will pay off in terms of increased profitability and market share in a highly competitive fashion industry.