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Seeking Young Designers: New Wave of Money Men Scout Market for Brands

Designers have a new set of eyes analyzing their wares this season: investment bankers, private equity funds and their silent partners.

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Instead of sizeable, multibillion-dollar deals, the industry may see more transactions such as NRDC's recent majority stake in Peter Som. But don't hold your breath waiting for deals to happen — investors eyeing this segment are cautious.

Joey Gabbay, president of private equity fund Bluestar Alliance, said it is important for him to be at the shows. Gabbay established the Bluestar Alliance fund in January with Ralph Gindi for the purpose of acquiring brands. Bluestar also owns Wellington Capital Group, of which Gabbay is president. Wellington last year bought women's sportswear brand Harvé Benard.

Gabbay said he attends the New York shows, but is not necessarily there prospecting for future acquisitions. "We look for design direction and can get ideas from the shows," Gindi said.

Bluestar Alliance's most recent acquisition was men's wear designer Ron Chereskin Studio Inc. for an undisclosed sum. Bluestar is said to be in talks to buy two other brands, a men's wear label and one that does both women's and men's wear.

Regarding the criteria that the private equity investors have for fashion firms, William Susman, chief operating officer of Financo Inc., said it is broad. "Number one is that the [target] must have substantial revenue and volumes that have grown to a solid level and are trending upwards," Susman explained. "They also need a good infrastructure and support staff behind their designers, and good distribution behind the brand."

Susman quickly added it doesn't matter what size the company is, but it has to be profitable. Susman said companies are simply looking for ways to better differentiate themselves in a crowded market.

"There is always the need for good design," Susman said, "but this is the first time in a long time that big retailers are valuing good design."

Traub and Magnusdottir said TSM expects an investment range of between $5 million and $20 million in companies that are either profitable or break even, and with minimum revenues of $5 million. The firm will raise capital from silent investors, from family funds to private banks, on a deal-by-deal basis.

"Over the next three years, we are looking to invest in five to 10 really good brands," Magnusdottir said.

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