Why Michael Kors Acquired Versace and Why it Makes Sense

This past week, Michael Kors acquired Versace for $2.1 Billion dollars. The news created shock and debate within the fashion industry. At first glance, this deal may seem irrational, but there are quite a few reasons as to why this acquisition happened and why it will work.

1)    Michael Kors is becoming a conglomerate.

Kors is renaming itself to Capri Holdings with the goal of becoming the first ever luxury conglomerate in the U.S. This goal may have already been achieved considering that Kors also acquired Jimmy Choo in 2017.

While there are other conglomerates in the U.S like Tapestry, this group owns mid-tier fashion brands like Coach, Kate Spade and Stuart Weitzman.  With the acquisitions of solely designer brands, Capri is setting itself apart from any other U.S conglomerate that already exists.

2)    Acquiring Versace means attracting bigger wallets for Kors

Part of Michael Kors’ DNA is their attainable price point. Versace is giving Capri the opportunity to enter into the luxury market, while maintaining their presence in the middle tier market.

3)    Versace needs the financial help

Even though Versace is one of the most well-known luxury brands, it is not as financially successful as its competitors, Gucci and Louis Vuitton. Being acquired means obtaining financial breathing room and the ability to focus on creation and design instead of revenue and expenses.

Capri is also focusing on direct-to-consumer retail by investing its e-commerce and distribution resources into Versace, which will increase the brands’ growth and its ability to keep up with demand, helping Versace grow into a powerhouse.

Sources:

https://www.businessoffashion.com/articles/professional/donatella-versace-is-going-to-stay-a-luxury-brand

https://fashionunited.uk/news/business/capri-holdings-an-american-in-paris-or-the-birth-of-the-first-u-s-luxury-fashion-conglomerate/2018092839199

https://www.highsnobiety.com/p/michael-kors-buys-versace-reaction/