👉 Background: Kering is behind some of the biggest luxury brands like Gucci, Saint Laurent, and Balenciaga. The company was originally a wood and building materials company before it pivoted to retail and luxury goods... talk about a glow up.

‍👉 What happened: In 2022, Kering shelled out €1.7 billion for just 30% of Valentino. As part of this deal, Kering had an option to buy the rest of Valentino by 2028. But, Valentino’s new CEO has said that cutting its debt and costs is the top priority and Kering’s net debt jumped 24% last year to €10.5 billion.

‍👉 What else: So now, Kering has asked for this 2028 option to be pushed out to 2029. The Qatar fund, Mayhoola, which owns 70% of Valentino, has accepted. So this will give Kering more time to get on top of their debt... and still have the chance to take over Valentino.

‍What's the key learning?

‍💡An option is like a “try before you buy” arrangement in an acquisition: instead of committing billions upfront, a company can purchase part of a target company and secure the option to buy the rest later.

💡This gives Kering the time to assess the company’s performance as well as market conditions before locking in the full price... but more importantly the option is not an obligation.

💡We’ve seen this play out before. In 2009, Disney first acquired a minority stake in Hulu in 2009. And then through a series of deals, it gained the option to buy the remainder from Comcast. In 2023, Disney exercised that option and valued Hulu at $8.6 billion USD. So, these staged deals give companies room to adapt based on the circumstances.