Armani clarified plans for his succession

Giorgio Armani has recently discussed various considerations about the future of his company, addressing the much-debated topic of his own succession in an interview with Bloomberg. Approaching his ninetieth birthday, Armani openly discussed the possibility of merging with a larger entity or going public: «Independence from large groups could still be a driving value for the Armani Group in the future, but I don’t feel I can rule anything out. What has always characterized the success of my work is an ability to adapt to changing times». This openness marks a significant change for Armani, who historically maintained a firm stance in keeping the company independent from mergers, listings, and ownership changes that have rewritten the geography of luxury in recent years. But the designer also clarified, to avoid speculation, that: «I don’t currently envisage a takeover by a large luxury conglomerate, but as I said, I don’t want to exclude anything a priori because that would be an ‘unentrepreneurial’ course of action». As for the potential listing, the designer said that «is something we have not yet discussed, but it is an option that may be considered, hopefully in the distant future». Armani places great importance on the correlation between company values and brand perception: he has been cautiously critical of the conquering business model of the French, saying he hopes for «for these values to persist and for many of these companies to maintain their independence as an essential principle».

Armani's consideration of a merger or listing, both options that would involve decentralization of power, comes at a critical time when the industry is witnessing an era of aggressive acquisitions, with major conglomerates like LVMH and Kering expanding their portfolios by acquiring smaller, prestigious brands. Nevertheless, Armani's willingness to not yield to market pressures and mere profit logic highlights the presence of an Italian ecosystem led by family businesses such as Prada, Zegna, Moncler, Brunello Cucinelli, or Ferragamo, which even in the face of the colossal size of the French mega-conglomerates, resists and thrives. According to Business Intelligence analysts at the newspaper, Deborah Aitken and Andrea Ferdinando Leggieri, «an €8 billion to €10 billion price tag for Giorgio Armani on takeover or spinoff may be seen as reasonable [...]. The gap of over €2 billion between direct brand revenue including licenses, to net revenue (based on 2022) confirms that Armani is heavily license-dependent, so cash could be partly used to switch more licenses in-house, reducing risk to the supply chain and strengthening brand identity». These 2 billion and some revenues (available data dates back to 2022) are significant, but they pale in comparison to the 80 billion that LVMH is capable of churning out, even amidst a spending freeze, although Armani did not seem enthusiastic about the acquisition policy of these large groups that always brings with it: «an inevitable shift in values and substantial upheaval, style included».

As for the actual succession, Armani spoke of «a pool of trusted people close to me and chosen by me» which seems to confirm what was revealed last November by Elisa Anzolin of Reuters, who obtained a confidential document dated 2016 outlining the composition of this group, which includes longtime collaborators and family members. Nevertheless, the cautious openness that the designer has shown on the subject of acquisitions and listings (although it seems to us to read between the lines that the designer said he is open to the idea only to not categorically exclude it) inevitably leads us to consider what the potential advantages of one or the other path would be. A merger, for example, could offer Armani the advantages of scale, increased market penetration, and resource sharing – all crucial elements considering the global scope of the business landscape we are talking about. Aligning with a larger group, Armani could leverage synergies in areas such as global distribution, marketing, and production while maintaining its design and brand ethics within the context of a conglomerate that respects its unique position in the market and its independence. On the other hand, a listing done in the style of Prada or Zegna would provide Armani's empire with access to the capital needed for expansion while ensuring its independence. A stock market listing could also attract and retain talent by offering stock-based compensation as Amazon already does.

However, it is clear that all these options involve, as mentioned earlier, a decentralization of power, especially considering the complex composition of Armani's business that the two Bloomberg analysts already mentioned. A merger could, for example, dilute central power control both on creative direction and operational decisions, risking a very precise identity that Armani has meticulously cultivated for decades. A stock market listing, on the other hand, would subject the company to the pressures and scrutiny of public investors and market expectations, which could shift focus from long-term goals to short-term financial metrics – which is why several groups and brands currently want to seek delisting such as the Tod’s Group. Moreover, the luxury market is sensitive to changes in consumer perception and brand positioning, so any changes in management structure or broader corporate strategy (which would include the company values underlying the strategy itself) must avoid altering that perception – as the 1970s businessman Bert Lance said: «If it ain't broke, don't fix it».