Why the Michael Kors and Versace Merger Matters

Michael Kors’ corporate mission – as quoted in the Business of Fashion announcement – is to become the first American luxury fashion conglomerate in the business. In fulfilling that mission, Michael Kors Holdings just announced the confirmation of its acquisition of the iconic Italian fashion brand Versace. With the closing of this deal comes a name change for Michael Kors Holdings to Capri Holdings.

The closing deal?  $2.1 billion.

Why is this such a huge business deal? It’s not just about the numbers, but let’s start there. The figure of $2.12 billion Kors is betting on Versace is over double the amount of current revenue produced by the Italian label. It’s a risky investment, but not an unusual one considering recent fashion company purchases made over the past few years. Capri is hoping to increase revenue to over two billion annually with the Versace label. They also plan to bring an additional 100 retail locations to add to the line’s current 200. This could mean a lot of room for growth for the notorious “niche” fashion brand. And for the family business affairs, Donatella will continue as Creative Director as she has since her brother’s death in the late 1990s.

The next question is what does the fashion chess table look like now? Kors/Capri is making waves with the Versace acquisition, especially after it’s recent acquisition of Jimmy Choo for $1.2 billion. As a publicly traded company, stakeholders can anticipate a bumpy ride with the potential for a lot of return. Although Capri is in the front running for America’s fashion conglomerate, it still has a long way to go before reaching powerhouse levels like LVMH (who own Louis Vuitton, Dior, Givenchy and more) or Kering (house of crazed Gucci and McQueen and others).

The doors of opportunity in high-end luxury fashion are closing for most, and opening for others. Will fewer avenues to the top limit the room for independent entrepreneurial growth? The luxury fashion business has seen some of its highest revenues in decades over the best few years with projected plans for growth. With the luxury fashion industry mirroring the American media system, will there be any long-term consequences for any future growth in fashion?

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Jessica Rafaeil is a P.R. and Branding Specialist that loves working with young artists, entertainers and entrepreneurs.

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