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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Aronsson said his firm "believes that the fashion/luxury/branded retail space offers great opportunities for those who truly understand, from an operating perspective, how businesses in this space work." He said, coupled with a bottom-line focus, "these attributes are necessary for successful investments in this sector."

On the venture capital side of the financial markets, sources said venture capital money is not making its way specifically to the fashion industry. However, Theresia Gouw Ranzetta, general partner at venture capital firm Accel Partners, said there is a "big trend" of investment in women-focused online content.

The recent swoon coincides with investors' realizations that the bulk of advertising dollars are targeted to women, and that marketers need new online outlets to grab women's attention — outside the largely dominated male content, such as sports and technology, that now dominates the Web.

Ranzetta points to Glam Media Inc., which has raised just less than $30 million in two venture financing rounds and an angel round of funding from big venture names such as Accel, DAG Ventures and Draper Fisher Jurvetson, among others. Glam Media owns and operates and the Glam Publisher Network of more than 350 Web sites, blogs and magazines, along with syndicated content.

Meanwhile, industry sources said now is the "perfect time" for strategic players to gain the upper hand over the leveraged buyout specialists. One banker, who requested anonymity, said there are always strategic buyers for good brands, such as those from the Liz Claiborne portfolio now on the auction block. Recent examples include that the $775 million VF Corp. paid for denim firm Seven For All Mankind and the $110 million deal for Lucy Activewear, both announced July 25.

The debt financing that was once available for LBOs has now disappeared. Investors are skittish about high-yield debt, the typical syndicate used by banks for bridge loans to fund the deals. Michael Kollender, an investment banker at Stifel Nicolaus, believes retail and apparel will continue to be an attractive sector for buyers. And, while he sees private equity jumping in when the opportunity is right — as evidenced by Sun Capital's $543 million bid last week for Kellwood Co. — he also believes strategic players could gain the upper hand in the current environment.

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