Investors believe in design and furnishings

Sector companies are increasingly in the spotlight of investors: this is what emerged from the conference “How to win the challenges of the global market” organised by Pambianco Strategie d'Impresa. According to Ernst&Young, Made in Italy is a key factor.Despite the limited growth in turnover in the years after the beginning of the financial crisis, the Italian quality design and furnishing sector can rely on the strong global recognition of Made in Italy and the favourable macro trends that will support growth in the next few years. These include the ongoing expansion of the culture of design in Western and emerging countries, the increase in the net wealth of the so-called HNWI (high net worth individuals) who, with annual compound growth of approximately 7% support the development of the sector; the smaller penetration of non-European markets by Italian highend design and furnishing products, in which Italy’s market share is considerably smaller compared to the high number of its brands and, finally, the increase in real estate, residential, hotel and commercial activities which, especially outside Europe, will boost the penetration of foreign markets by quality brands. Today, Italy accounts for approximately 30% of the high-end market.However, it represents only about 10% of the sector imports for many countries around the world. Against this background, Italian quality design and furnishing companies show an extraordinary talent for innovation, style, originality and visibility, but their size is also 50% smaller than that of their foreign competitors and their profitability is below the potential of their brands in terms of reputation, history and positioning.This is one of the reasons why M&A transactions have increased since 2013 globally and, in particular, in Italy. Specifically, in the first half of 2015, 20 transactions have been announced around the world (32 in 2014 as a whole). Furthermore, in the same period, 9 transactions (i.e., 45% of the total) involved Italian companies, compared to 5 (equal to 16%) in 2014.Except for some mergers which involved sector companies and the acquisition of Italian brands by large foreign groups, most of the transactions carried out over the past few years involved financial investors and private equity funds which increased their presence in the sector, sometimes launching an initial potential consolidation process which is aimed at combining first class brands and products, which often complement each other.Indeed, financial investors accounted for 36% of the sector transactions carried out from 2011 until now.