Following several weeks of speculation, Coach, Inc. has officially acquired Kate Spade & Co. The $2.4 billion deal is intended to bolster Coach’s weakened brand equity and reads as an effort to progress a plan of building its own luxury conglomerate.

The acquisition, announced Monday morning, comes two years after Coach acquired footwear brand Stuart Weitzman for $574 million. Coach is also rumored to have its eye on Jimmy Choo, and it was shut out by Burberry for a potential purchase last December, indications the company is focused on evolving its portfolio of brands. While Coach may not yet have the chops to compete with powerhouses like LVMH — which owns 70 subsidiary brands across fashion, jewelry, footwear, cosmetics, fragrances and spirits — it could soon find itself competing with more contemporary groups.

Sucharita Mulpuru, former retail analyst at ShopTalk, said if Coach continues on a trajectory of similar acquisitions, it has the potential to rival the likes of Perry Ellis International and VF Corporation, the latter of which owns Timberland, Vans and The North Face. “I wouldn’t put Coach in the league of LVMH quite yet. LVMH is in its own world of ultra-high-end luxury.”

Where Coach failed in the past was becoming too accessible through discounting and department store and outlet sales, which ultimately diluted the brand, she said.

“One fundamental truth of luxury is it needs scarcity to maintain its brand equity over time,” she said. “The way you grow luxury is not to milk every ounce of the existing brand you have, but to have a portfolio approach.”

The merger is expected to officially go into effect in the third quarter of this year, and Mulpuru said it will be instrumental to the company’s diversification, despite Kate Spade’s status as a Coach competitor. The acquisition of Kate Spade will not only add another notch to Coach’s belt, but it will also help it to better connect with millennial consumers. A major draw for Coach is Kate Spade’s continued push into the lifestyle space and its celebrity-driven and whimsical marketing approach that appeals to younger shoppers.

“Kate Spade has a truly unique and differentiated brand positioning, with a broad lifestyle assortment and strong awareness among consumers, especially millennials,” Coach CEO Victor Luis said in a statement.

Aydan Sarikaya, client strategy associate at L2, said it’s important for companies to consider holistic growth opportunities when making major acquisitions, including its impact on e-commerce, brick and mortar sales and digital marketing. Kate Spade has been tactful in these areas — namely experimenting with social commerce like shoppable Instagram posts and finding success in celebrity sponsorships — establishing itself as a solid fit, she said.

However, Neil Saunders, managing director of GlobalData Retail, wrote in a statement that he cautions the brands to be wary of similarities, including comparable products and consumer demographics. As a result, he urged Coach and Kate Spade to continue to focus on autonomous growth and development.

“Successful execution will require a degree of separation between the two businesses,” he wrote. “The brands must remain distinct, which means the creative thinking and strategy of both businesses cannot become too intertwined. It is also the case that the main Coach brand, while in much better health, still needs much nurturing and care in a very tough environment.”

Mulpuru said, while Kate Spade is a savvy addition to the Coach roster, it will take several more high-profile acquisitions to establish Coach as a major luxury holding company. While Coach could also benefit from taking a risk on emerging brands, in an effort to catch them on the cusp of explosive growth, she said this is a step in the right direction.

“This was the only way for Coach to grow, through acquisition,” she said. “The Coach brand itself is saturated and already selling in all the places they could be, and they already have outlets and wholesale. Where else could they grow? You can create a new brand or team with an existing brand. With Kate Spade, you have annuity, and that’s not an uncommon strategy.”