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The luxury market in the Middle East has seen a significant boost in recent years and is expected to continue to grow throughout the upcoming years.
The market was worth almost $10 billion in 2021, a 23 percent increase from pre-pandemic levels, with projections of reaching $11 billion in 2023.
Luxury spending has also shifted in the Middle East, repatriating a considerable amount as luxury consumers who were restricted from traveling to Europe during the pandemic. Domestic spending now makes up 60 percent of luxury consumption.
Luxury brands are also finding ways to cater specifically to the Middle East market by opening new stores, staging fashion shows locally, and creating local content by collaborating with Middle Eastern influencers.
All of these factors have contributed to a promising outlook for the fashion industry in the Middle East in the year 2023.
Joint Venture between Chimera and Haeres Capital for Investing in European Luxury Brands
Chimera Abu Dhabi, a private investment firm, and Haeres Capital, a private equity investment company, have joined forces to establish a mutual investment vehicle aimed at acquiring European luxury brands.
The newly formed entity, known as ChimHaeres Investment Holding, will initially concentrate on Italy, France, Switzerland, and the UK, as stated in a press release.
ChimHaeres will target both established and emerging luxury brands with promising growth prospects, catering to a younger and increasingly global consumer base, according to Mirian Khalaf, the Head of Private Equity at Chimera Abu Dhabi.
ChimHaeres has successfully acquired a majority stake in Zagato, an Italian coachbuilder and car designer. At the same time, it has also obtained 100% ownership of Vionnet, a French haute couture label.
The joint investment entity has also agreed to acquire a majority stake in Fogal, a Swiss fashion hosiery brand.
Furthermore, Haeres has contributed its majority equity stake in Borsalino, an Italian hat maker, to ChimHaeres. Haeres Capital played a leading role in Borsalino, known for their stylish fedoras and straw panamas that are adored by movie stars and celebrities.
The Mididle East the Centre of Luxury Brand M&As
Vision Investments Acquires Roberto Cavalli
The Roberto Cavalli Group was founded in the Seventies by fashion designer and entrepreneur Roberto Cavalli. Today, the Group boasts a diverse portfolio of internationally recognized labels catering to different segments of the high-end market.
Following financial losses of €33.7 million in 2017, Roberto Cavalli brands underwent a change in ownership. The Italian luxury label was acquired in 2019 by Vision Investments, the UAE based investment firm of Hussain Sajwani, the president of DAMAC Properties . The transaction involved the complete acquisition of Roberto Cavalli SpA, previously majority owned by the Clessidra investment fund.
The purchase was made by Vision Investments, a subsidiary of DICO Group, which was established in 1992 as Sajwani’s private investment company.
Our sources indicate that the agreement to acquire 100% ownership of the company was valued at approximately 160 million euros ($179.37m).
This deal is aimed at revitalizing the Italian luxury brand and restoring its position as one of the top luxury brands globally.
It also saved brands from a financially troubled situation, as creditors had filed for Roberto Cavalli’s bankruptcy in China.
Kering Buys 30% Stake in Valentino from Qatari fund
Another important M&A was that of Valentino Garavani brands back in 2012. Mayhoola for Investments S.P.C., the investment arm of Qatar’s royal family, bought Valentino for €700 million, at that time the world was taken aback by the high evaluation of the brand.
Nevertheless, earlier this year, Kering just bought a 30% stake in Valentino from Mayhoola, the Qatari company. This acquisition costs €1.7bn in cash and sets the stage for a broader partnership, potentially making Mayhoola a Kering shareholder.
Moreover, Kering has the option to acquire the entire Valentino brand within five years, with this deal, Kering could eventually take full control of Valentino by 2028.
Notably, Valentino generated €1.4bn in revenue in 2022 and operates 211 stores worldwide.
The primary motivation behind this move is to boost Kering’s growth and stay competitive against industry giants such as LVMH and Hermes.
Arrival of the Rich
The UAE has attracted a significant number of high-net-worth individuals (HNWIs) in 2022, as reported by the Henley Global Citizens Report.
The influx of 4,000 HNWIs in 2022 is a substantial increase from the previous net inflow of 1,300 in 2019, making the UAE the top choice for wealthy individuals to relocate.
This popularity is also evident in the luxury retail sector, with Dubai being the preferred destination for brands expanding into the region.
One example is Delvaux, a Belgian luxury house, which opened its first Middle East market at The Dubai Mall in 2022.
The success of hosting Expo 2020, with over 24 million visitors from 178 countries during its six-month duration, along with a successful vaccination campaign, proactive pro-business policies, and a range of residency visa options, all of these factors are expected to further boost investments and drive the growth of luxury retail in Dubai.
Luxury Creates More Luxury.
In addition to promoting its application for hosting the FIFA World Cup in 2030, the Kingdom of Saudi Arabia has been investing heavily in attracting high-profile football stars to play in the country.
As a result, many of these players are likely to consume luxury goods, such as high-end clothing, accessories, and cars.
In order to cater to this demand, the Kingdom has plans to launch several new luxury hotels, including some of the most prestigious brands in the world, such as St. Regis, EDITION, Fairmont, Raffles, Intercontinental, Grand Hyatt, and Jumeirah.
With an influx of international travelers and football celebrities, the consumption of luxury goods is expected to rise significantly in the Kingdom, creating new opportunities for businesses looking to tap into this market.
Qatar has also experienced a rise in luxury brands with the opening of the luxury mall Place Vendome. Brands such as Gucci, Prada, Dior, Valentino, Fendi, Bottega Veneta, and Loro Piana have set up shop there.
Nevertheless, at the moment Dubai remains a significant hub for luxury retail in the region. The city offers a well-established retail infrastructure and has seen a strong rebound in tourism, thanks to its handling of the pandemic. Dubai is known for its lifestyle offerings and attracts luxury travelers and high-net-worth individuals.
Conclusion:
The Luxury Market in the Middle East is experiencing significant growth and transformation for not only 2023 but for years to come.The region is becoming increasingly prominent with its strong luxury spending, strategic investments, and changes in consumer behavior.
With the state owned funds strategic M&A’s and Dubai’s appeal as a luxury destination, the Middle East is a vibrant and exciting place for luxury brands and consumers. However, there are some intriguing questions to consider.
How will emerging brands create their own space in a competitive market? What unique experiences will capture the discerning Middle Eastern luxury consumer? And, in this era of evolving values, how will sustainability and exclusivity play a role in shaping the luxury industry? The answers to these questions will shape the future of luxury in the Middle East.
D’Andrea & Partners Legal Counsel, based in Dubai, along with a network of 12 global offices, will remain vigilant in tracking advancements within the luxury sector in the Middle East. We are dedicated to addressing any inquiries you may have regarding this industry and beyond.
Disclaimer：
The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.
