Farfetch detailed its acquisition activities over the past few years in a filing with a U.S. regulator this month, shedding light on the previously undisclosed terms of its deals to acquire the likes of Violet Grey, artificial intelligence-focused entity Allure Systems Corp, and resale platform LUXCLUSIF, the latter of which is key to Farfetch’s aim of becoming “the leading global platform for pre-owned luxury.” More broadly, the M&A efforts underlie London-based, NYSE-listed Farfetch’s multi-faceted strategy that includes a consumer-facing e-commerce platform, its Farfetch Platform Solutions (a set of tech solutions/services to power luxury retailers and brands’ e-commerce sites), and a growing arsenal of owned brands and licenses, which was helped along by its $675 million acquisition of New Guards Group in 2019.
More specifically, Farfetch stated in the Annual and Transition Report that it filed with the U.S. Securities and Exchange Commission on March 8 (for the fiscal year ending on December 31, 2022) that its model consists of three reportable operating segments …
(1) Digital Platform: Comprised of the Farfetch Marketplace, Farfetch Platform Solutions, Violet Grey, BrownsFashion.com, respective websites of the brands in the New Guards portfolio and StadiumGoods.com, Farfetch Connected Retail, and any other online sales channel operated by the Group. For this segment, it says that revenue – which was $1.74 billion in 2022 – is “derived mostly from transactions between sellers and consumers conducted on our technology platforms;” (2) Brand Platform: Comprised of business-to-business activities of the brands in the New Guards portfolio and includes design, production, brand development and wholesale distribution of brands owned and licensed by New Guards, including the franchised store operations. Revenue in this segment – which amounted to $477 million in 2022 – is “generally derived from wholesale sales of goods;” and (3) In-Store: Comprised of Group-operated stores, including Browns, Stadium Goods, Violet Grey, and certain brands in the New Guards portfolio, with its nearly $100k in 2022 revenue being derived from “sales made in the physical stores.”
As for its M&A activity, Farfetch states in the report that it has “acquired and may in the future seek to acquire, collaborate with or invest in other companies or technologies that we believe could complement or expand our brand and products, enhance our technical capabilities, or otherwise offer strategic opportunities.” Delving into the deals, Farfetch confirmed that it acquired 100 percent of the share capital of Violet Grey Inc. on February 1, 2022, “as part of [its] strategy of expanding its Farfetch Marketplace Beauty offering.” Farfetch reveals that it paid $49.4 million in cash for the now-10-year-old brand, along with $1.3 million of reverse vesting shares and $5 million of Farfetch restricted share units (“RSUs”).
Wannaby – On April 5, 2022, Farfetch acquired 100 percent of Wannaby Inc., which “primarily provides software under license to clients in the fashion industry, allowing retail customers to virtually ‘try on’ fashion items.” Farfetch paid $25.5 million of upfront cash, $5 million of reverse vesting shares, and Farfetch RSUs.
Luxclusif – On December 6, 2021, Farfetch acquired 100 percent of Upteam Corporation Limited (“Luxclusif”), and its four fully owned subsidiaries, which comprise a B2B tech-enabled seller of pre-owned luxury goods. Purchase consideration of $26.8 million was comprised of $7.8 million of cash, $5.9 million of deferred cash or share consideration, and $13.1 million of deferred share consideration.
In connection with the Luxclusif deal, Farfetch states that it has “expanded our pre-owned offering category as we amplify our Positively Farfetch sustainability proposition,” noting that “in our aim to become the leading global platform for pre-owned luxury, we acquired Luxclusif, a B2B service provider with a successful turnkey solution enabling the acquisition, authentication and sale of second-hand luxury goods, which we believe will allow us to significantly accelerate our pre-owned capabilities through the development of key technology and service features.”
Allure – On December 20, 2021, Farfetch acquired 100 percent of Allure Systems Corp and its fully owned subsidiary, Allure Systems Research France, which uses artificial intelligence to create high-quality on-model images via 360 degrees renderings, allowing retailers and brands to scale quality imagery with automation. The terms: Purchase consideration of $21.7 million comprised of deferred payments of $1.5 million, cash consideration of $15.9 million, and share consideration of $4.4 million. Reflecting on the driver of the acquisition, Farfetch says that “this investment is part of [its] strategy of accelerating the digitization of the global luxury industry,” with the “primary reason” for the acquisition being “to provide an enhanced customer experience on Farfetch Marketplace and drive efficiency in our operational processes.”
JBUX – On September 14, 2021, Farfetch acquired 100 percent of JBUX Limited – which provides marketplace technology to multi-vendor online businesses via a cloud-based SaaS platform – for $4 million in cash, plus post combination remuneration. This investment is “part of the Group’s vertical integration strategy of accelerating the digitization of the global luxury industry by acquiring and developing brands and the Group expect to benefit from [JBUX’s] technology platform and employee skills,” per Farfetch. “This acquisition will also allow the Group to enhance its marketplace offering.”
Alanui – On March 16, 2021, New Guards Group Holding, a subsidiary of Farfetch Limited, “completed its acquisition of Alanui, for $nil consideration,” with the acquisition and control being achieved through “the removal of a shareholder veto from the agreement between New Guards and Alanui’s other shareholders that had previously prevented the Group from obtaining control of Alanui.”
Ambush – On February 5, 2020, New Guards completed the acquisition of 70 percent of the outstanding shares of jewelry and apparel company Ambush Inc. for cash consideration of $12.1 million. Farfetch says that it “expects to benefit from Ambush’s brand bringing with them a strong passion for and knowledge of luxury jewelry and ready-to-wear apparel,” noting that this acquisition will also allow it “to enhance its marketplace and stores offering.”
Finally, on the trademark licensing front, Farfetch revealed that as of December 31, 2022, this primarily includes Off-White, Stadium Goods, Heron Preston, and Palm Angels, which are categorized as “intangible assets with definite useful lives.” In terms of the individual licenses, Farfetch states that: (1) the license Off-White has a net carrying amount – i.e., a current market value – of $311.3 million and a remaining life of 3 years; (2) Stadium Goods has a net carrying amount of $86 million and a remaining life of 11 years; (3) Heron Preston has a net carrying amount of $17.4 million and a remaining life of 4.6 years; and (4) Palm Angels has a net carrying amount of $111 million and a remaining useful life of 8.6 years.
Additionally, on February 22, 2022, Farfetch entered into an agreement with Authentic Brands Group for “the exclusive distribution rights of Reebok-branded footwear and apparel ranges within certain countries in the European region,” which has an intangible asset amount of $364.1 million that represents the present value of the $368.2 million minimum contractual royalty payments and will be amortized straight-line over the 11-year life of the agreement.
UPDATED (Mar. 21, 2023): This article was updated to correct Farfetch’s 2022 Brand Platform revenue to $477 million.