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Designers have a new set of eyes analyzing their wares this season: investment bankers, private equity funds and their silent partners.
Nudging themselves between the hordes of buyers, editors, celebrities and socialites are a growing crop of investors prowling for acquisitions in the designer world. The investors are eyeing companies with sales of between $2 million and $100 million that have the potential to grow further — and those on the prospect list include the likes of Anna Sui, Catherine Malandrino, Hussein Chalayan and Phoebe Philo.
The potential buyers include investment funds and private equity firms such as the recently formed TSM Capital, founded by industry veteran Marvin Traub along with Mortimer Singer and Aslaug Magnusdottir, and The Atelier Fund, which was launched this year by Marty Wikstrom and Dawn Mello.
Then there are strategic players such as NRDC Equity Partners, owner of Lord & Taylor, which has snapped up a number of designers; Renzo Rosso's Only the Brave Srl, owner of Martin Margiela and Sophia Kokosalaki; Fast Retailing Co. Ltd., owner of Theory, Helmut Lang and Uniqlo, which recently said it has set aside $3.5 billion for overseas acquisitions, and Li & Fung USA, which bought some of the moderate brands being sold by Liz Claiborne Inc. Last month, Li & Fung acquired vendor Regatta Pacific Alliance, which provides Simply Vera by Vera Wang, Daisy Fuentes, Lagerfeld-Karl Lagerfeld, Metro 7, Nicole Miller, Todd Smith and other private label collections for retailers such as Kohl's Corp., Wal-Mart Stores Inc., J.C. Penney Co. Inc. and Charming Shoppes Inc., and said it planned to use Regatta as a base to make further purchases.
For foreign groups like Istithmar, which this year beat out Fast Retailing to buy Barneys New York, or even Only the Brave, now is the perfect time to make an acquisition of a U.S. designer or retailer, given the weakness of the dollar.
The investors have trained their sights on designers who have the potential to be marketed and developed as a global brand. Driving their interest is a shift from bigger "megadeals" to smaller-sized transactions, financial sources said. Given recent turmoil in the credit markets, the pace of mergers and acquisitions activity has slowed. According to Dealogic, year-to-date M&A deal volume in the general retail sector is down 7.8 percent to $38 billion from $42.1 billion last year.