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A Sea Change in Luxe: Tough Market Favors Buyers Over Sellers

When sales of luxury products were riding high, it seemed just about any designer was ripe for acquisition. But now it's a buyers' market.

NEW YORK — When Pegasus Apparel Group acquired Miguel Adrover’s business in March 2000, it gave the designer a Jaguar to use for tooling around town. The car was a status symbol worthy of the successful designer Pegasus hoped Adrover would become. But it was returned when the ambitions of Pegasus —now called Leiber Group — disintegrated. These days, Adrover is bicycling his way through the city.

The trajectory of the market for acquiring designer businesses has closely followed Adrover’s mode of transportation. When sales of luxury products were riding high, any designer with a pair of scissors and a degree from FIT was ripe for acquisition by a luxury conglomerate. Even newcomers like Adrover was at the time, and whose talent was praised by the press but whose sales were untested, got generous deals.

"It was kind of a free-for-all," Adrover’s business manager, Dennis Walker, recalled. "People were throwing money and cars at designers."

Some of the most rapacious buyers were European companies. In the late Nineties, LVMH Moët Hennessy Louis Vuitton, Prada and Gucci Group appeared to be invincible juggernauts able to take little-known brands and make them bigger and better. Now, a chastened Wall Street has turned a cynical eye on acquisitions, and shareholders are telling ceo’s to stick to their proverbial knitting and put their resources —both financial and managerial — into their tried-and-true core brands.

In general, buyers seem to have a leg up over sellers these days. The door has been opened for opportunistic buyers such as Lawrence Stroll and Silas Chou — the proud new owners of Michael Kors — or any other investor nursing a dream of building a luxury group of his or her very own, to swoop down and pick brands off the larger fashion vines.

LVMH’s sale of the Hard Candy and Urban Decay cosmetics brands, Gucci’s recent announcement that Yves Saint Laurent will turn a profit one year later than most recently forecast and reports that Compagnie Financière Richemont AG is dissatisfied with its Lancel purchase are just a few examples of the uphill battle luxury brands face in these times of geopolitical uncertainties, weak global economies and nervous consumers.
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