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The Process Of Overseas M & A Of Li Ning Family Is Accelerating, But The Challenge Is Still Ahead

2022/6/11 11:45:00 0

Li Ning's largest shareholder, extraordinary China, will take over Clarks, a British shoe brand. This is the third international brand of extraordinary China controlled by Li Ning family since 2020.

Compared with "Li Ning" brand, Li Ning's largest shareholder is particularly low-key in China. However, with Fanfan China as the platform, Li Ning family's overseas M & a process is speeding up - in 2020, Fanfu China will take control of the Hong Kong local brand Bao Shilong; At the beginning of 2022, it completed the acquisition of Amedeo Testoni, a century old luxury brand in Italy.

In recent years, with the rise of "national tide", the competition of local sports brands in the domestic market is becoming increasingly fierce, so it is an inevitable choice to expand the overseas market. Behind the extraordinary Chinese expansion is the pressure of the local sports brand red sea competition.

Is successive overseas mergers and acquisitions a panacea to maintain competitive advantage? On June 7, Li Yingtao, a senior analyst of Yiguan's brand retail industry, replied in writing to the reporter of daily economic news that overseas acquisition and merger is a necessary step, but after that, the problem of localization of overseas market should be considered.

　　 Acquisition of Clarks overseas

If all goes well, extraordinary China controlled by the Li Ning family will become the third international brand since 2020. According to the announcement, after the special meeting of shareholders held on June 15 passed a resolution, its purchase of Clarks, a British shoe brand, would be finalized.

In recent years, Clarks' performance has been significantly affected by the epidemic situation, and its income is nearly cut off. Clarks' revenues in the past two years were 779 million pounds and 926 million pounds respectively, according to the announcement; Net profit was - 151 million pounds and 53 million pounds respectively. Compared with 2019 before the outbreak, Clarks' global revenue reached nearly 1.4 billion pounds. In addition, Clarks' main market is still the European and American markets. In the past three years, Clarks' revenue in major markets accounted for more than 80% of Clarks' total revenue.

After the outbreak, the board of directors believed Clarks had growth potential by entering the Asian market (especially the Chinese market) and increasing the utilization rate of online platforms, Fanfan China said in the announcement. In addition, the Board believes that the deal will create synergies between Clarks and the multi brand footwear business (in marketing, supply chain solutions and distribution channels), and further expand the group's global market map.

According to the agreement, Clarks will become an indirect non wholly owned subsidiary of Feifan China after the acquisition. According to the announcement, marvel China will continue to develop Clarks business by improving operational efficiency, redefining customer classification and strengthening brand building.

Feifan China said in the announcement that it believed that the management team of multi brand shoes and clothing business and extraordinary China could reverse Clarks' financial performance and expand the group's revenue source. At the same time, the board also believes that the global retail market will recover after the outbreak, and Clarks' business performance will improve.

On June 6, Ma Gang, a clothing retail expert, told reporters of the daily economic news via wechat that in general, acquisition and merger mainly focus on three aspects: the tangible assets of the other party, such as production capacity; Intangible assets, such as brand value, intellectual property, etc; Value added part, such as market complementarity and R & D complementarity of both sides. Therefore, overseas expansion, on the one hand, the target of acquisition is cost-effective, and the acquirer has strategic planning for expansion, so it is easy to form an acquisition. Special China through the multi brand, the integration is still big clothing industry, many brands can form resource integration and complementary.

Accelerate the expansion, successively acquired Fort Shilong and Amedeo Testoni

Li Ning family is speeding up the merger and acquisition expansion, and in the past two years has at least two brands in the bag.

In July 2020, fanciful China completed the acquisition of the controlling right of Bao Shilong, a local clothing brand in Hong Kong, China. At that time, it was mainly engaged in the retail and distribution of shilongbao in China; At the beginning of 2022, extraordinary China completed the acquisition of Amedeo Testoni, a century old luxury brand in Italy.

Li Yingtao, a senior analyst in the brand retail industry, told the daily economic news in writing on June 7 that, on the one hand, resources, capital and ability are the basic factors for brand overseas M & A; On the other hand, facing the future development, for Li Ning brand, the Chinese market will gradually saturate in the future. To maintain sustainable growth, we mainly rely on the overseas market.

Photo source: screenshot of Li Ning's 2021 Annual Report

With the fierce competition of local sports brands, mergers and acquisitions are becoming the "sharp weapon" for each brand to expand the market.

Thanks to the popularity of "national trend", the financial performance of local sports brands in 2021 is brilliant. In terms of revenue scale, Anta still ranks first among local sports brands, with revenue approaching 50 billion yuan and net profit increasing by 49.55% year on year, reaching the highest growth rate in the past decade; However, Li Ning broke through the revenue barrier of 20 billion yuan, and the growth rate of net profit reached 136.14%; In the third place, special step also achieved a breakthrough in revenue and entered the 10 billion camp.

Behind the ever-increasing revenue, the "hand-in-hand war" of local sports brands is becoming increasingly fierce. After the story of "national tide", overseas acquisition and merger has become the key to expand the market of local sports brands.

Overseas M & A is a necessary step of internationalization, but the challenge is still ahead

Everyone wants to find the next "FILA.".

In 2009, Anta purchased the trademark right and management right of Italian century sports brand FILA (FILA) in China with a price of 332 million yuan. According to the annual report of 2021, Anta and ferro account for 48.68% and 44.24% of Anta Group's revenue of 49.328 billion yuan. In addition to Philo, outdoor sports brand Arc'teryx, ball manufacturing brand Wilson and other brands have been included in Anta in recent years.

In 2019, Tebu started a multi brand and international development strategy, and successively acquired SAUCONY, merell, palladium and other brands.

As for the acceleration of the pace of merger and acquisition of local sports brands in recent years, Li Yingtao said that in 2021, Li Ning's revenue exceeded 20 billion yuan, Anta's revenue was close to 50 billion yuan, and the scale of revenue and profitability were not bad compared with international brands. In this case, for sportswear brands, more consideration is given to the multi brand matrix and further regional expansion. Through the merger and acquisition of overseas brands, the regional expansion of overseas market is realized, which is also in line with the current development stage of the brand.

With the increasingly fierce competition, it seems that the merger and acquisition of foreign brands is becoming a "good medicine" for local sports brands to expand their local and overseas market share.

Li Yingtao believes that overseas M & A is a way with relatively high success rate and efficiency. Although the initial capital cost of M & A is relatively high, it can gain the advantages of time and efficiency.

Compared with Adidas and Nike, he will be more competitive in the international market. If we rely on local brands to attack, it is actually more difficult. At the same time, we should also consider the localization problems in overseas markets. Through overseas M & A, to some extent, it solves the problem of localization and local consumers' cognition of brand.

But after the successful acquisition and merger of overseas sports brands, is the local sports brand a step towards internationalization? In Magang's view, the answer is No. He believes that the introduction of foreign brands to open up the domestic market, this is not going to sea, going abroad means selling domestic products to foreigners. Internationalization refers to "internationalization of income", not "internationalization" of foreign brands.

Li Yingtao believes that the overseas merger and acquisition of local sports brands is also one of the paths for the brand to go abroad, and it is also one of the steps for the local brand to go abroad. After the completion of overseas M & A, the brand can gradually understand the operation system of the overseas market, accumulate local resources and talents, understand the characteristics of local localization, and then copy these experiences to the brand. Otherwise, local brands may encounter Waterloo if they go abroad rashly. Therefore, overseas acquisition and merger is a necessary step before this.

On June 7, extraordinary China replied that there was no other information to disclose except for the official announcement regarding Clarks' acquisition.