By Brinley Knopf
Financial blog Betaville recently reported a prospective merger between Coach and Burberry—and just the prospect of the buyout was enough for Burberry shares to increase by 8 percent. The blog disclosed the business stratagem, reporting that Coach had been partnering with financial advisors from Evercore on the potential company consolidation, however; the sources were unnamed and were therefore fallible.
According to insider sources as of October 23rd, reports of a British Burberry and U.S. Coach merger are only simple speculation—the two companies are not and have not been in talks at this time. Another source supplied that the deal could not be “in the cards” due to the two business’s very dissimilar business strategies.
The idea of the merger isn’t so much new as reborn—the conjecture came about over five years ago but was dismissed by analysts. But now that Burberry is faced with a management reestablishment and stagnant sales, the merger talk has reemerged from the financial shadows.
“Burberry could indeed be seen as the British Coach,” stated Luca Solca, luxury analyst at Exane BNP Paribas. “Yet, contrary to Coach, most of the efforts at Burberry in the past 20 years have gone in the direction of elevating the brand and moving it into mega-brand price territory, rather than squarely into accessible luxury.”
Solca said that while running Burberry “the American way” would look promising short-term, it would run the risk of brand trivialization and could even compromise valuation multiples and growth in the long term. He gave pertinent examples like Coach, Michael Kors and Abercrombie & Fitch to demonstrate that trajectory. For that reason, to Solca, “a merger of Coach and Burberry would primarily be a merger of problems.” He went on to say that in fact, the number of mergers in the sector that have upped traction and sales of brands are few and far between.
News platform Bloomberg Gadfly takes a stance opposite of Solca, projecting that Coach could have a hand in helping Burberry overhaul their company with the right marketing plan, new creative minds, and higher-quality products. With their teamed efforts, the two companies could bolster Burberry’s weakened wholesale business and acquaint the millennial market to their brand. Bloomberg Gadfly thinks this would have to be a “delicate operation” considering Burberry’s overexposure and subsequent brand damage of ten years ago, but that Coach’s recent business track record proves the company qualified for the remodel.
Food for thought, Burberry. Both companies have yet to comment on the merger.