While this is a buyer’s market, companies still aren’t giving away their secondary brands for nothing. "We’ve seen a couple of businesses that people paid $200 million for that are worth 20 percent of that now. These are companies that are not worth a lot of money. They’re going to attempt to sell a lot of these brands. The question is, ‘Who are the realists [in terms of asking price]?’" Howard wondered.
One investment banker who looked at Jil Sander about a year ago concluded that Prada Group "paid way too much money for that company and invested a huge amount of money in Jil Sander stores. It’s probably worth less than it was worth in the beginning."
Jil Sander wasn’t the only one with a hefty price tag. Like the dot-com industry, when venture capitalists funded start-ups basing their investment decisions on little more than a ceo’s hypothetical vision, fashion titans believed they could breathe life into a luxury business and virtually spin wool into gold. At one particularly frenzied moment, Prada and LVMH joined forces in 1999 to buy 51 percent of Fendi for $545 million, which valued the company at more than $1 billion.
Of course, the "great brands," as Stroll calls them, are probably not going to end up on the selling block. A company would be foolish to dispose of its strongest assets. Then again, everyone’s definition of great is different and a brand that is languishing at one company because its resources are being directed elsewhere could be nurtured and grown under a different owner.
Not surprisingly, fund groups are taking a safer path than entrepreneurial folks like Stroll and Chou, who successfully built Tommy Hilfiger into an industry giant.