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Why a Burberry-Coach Merger Might Happen and Why It Could Work

Burberry and Coach put paid to the notion put forward by financial blog Betaville that the two brands were in talks to combine, shortly after the story broke last month, but arguments for and against the idea still abound.

While one analyst described the suggested scenario as “a merger of problems,” others think a deal, if done right, could bear fruit.

“A lot of change is happening both on the retail side and on the brand wholesale side because the dynamics of the market are shifting in terms of buyers, size of market, what’s happening geographically. It’s all reshaping and redefining a market,” said Kathy Gersch, executive vice president of leadership consulting firm Kotter International, explaining to Sourcing Journal the possible thought process behind such a merger. “They’re in a broadly defined luxury space so as they’re trying to look at their own strategies and figure out how to compete, it’s not surprising that they might be in talks.”

But a note published by Exane BNP Paribas analyst Luca Solca disagreed: “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,” he wrote. “M&A history in luxury has shown that mergers don’t obviously help in regaining brand traction and desirability.”

Read more at Sourcing Journal.