Today, BoF brings you an exclusive interview with a key adviser to the private family trust which, as announced today, made an investment in Lanvin, one of the hottest fashion brands in the world.
PARIS, France — Over the past few years, under the creative stewardship of industry darling Alber Elbaz, Lanvin has risen to heights that most fashion brands can only dream of, with nearly unanimous positive reviews from buyers and editors and a seemingly insatiable appetite amongst luxury fashion customers for Lanvin's clothes, accessories and jewelry.
There was only one problem. After having invested significant sums early on, Shaw-Lan Chu-Wang, who purchased Lanvin from L'Oreal in 2001, was not injecting any more cash to grow the business. This left Lanvin's hyper industry buzz and brand potential underexploited.
Not anymore. Today, in a press release issued by Lanvin (and as reported in WWD), it was announced that Arpège, the brand's parent company, has received a cash injection for a minority investment representing 12.5 percent of the equity. The investment was made with a "long-term" view, apparently an indication that the investor does not plan to flip the investment for a quick profit. This is a refreshing change from some of the disastrous investments we have seen in fashion brands in recent years.
I spoke with Pierre Mallevays who advised the private family trust on their investment in Lanvin to learn more about the dynamics of the deal and the fashion and luxury market in general. Pierre is a friend and colleague, and one of the leading investment experts in the luxury space, first having worked as Head of M&A for LVMH for over seven years, and now as Managing Partner of London-based Savigny Partners, a boutique M&A advisory firm.
BoF: There have been a flurry of new transactions (or potential transactions) announced in recent weeks, including those of Escada, Lacroix, and now Lanvin. Is the luxury M&A market turning a corner?
Yes, absolutely. The Escada deal is at the tail-end of the distressed transactions brought about by last year’s crisis, just like the Lacroix deal. But the significant rise of stockmarket levels since May this year has reduced the valuation gap between buyers and sellers. The M&A market came out of hibernation some time in September– deals are doable again.
BoF: After record valuations multiples of up to 13x EBITDA or more on transactions like Permira's acquisition of Valentino and Towerbrook Partners' investment in Jimmy Choo, are luxury investors today investing any differently, say with more reasonable expectations about valuations, returns and timing of exit?
You are right again. Private equity embraced the world of luxury goods with the view that there would be no end to the good times, spurred on by a solid economy generating an ever growing number of wealthy customers and seemingly endless reservoirs of growth in China and India. A lot of investors have been burned, and the mood is now all about opportunity investing as opposed to sector enthusiasm. A case in point is Brioni, a very good and pure play brand with excellent growth prospects, which allegedly failed to find a minority investor at a rumoured 10X EBITDA multiple.
BoF: What was the rationale for Lanvin to take investment from a private investor rather than a strategic partner from a major luxury goods group?
With Alber Elbaz at the creative helm, Lanvin has seen truly extraordinary critical and commercial success and, having turned profitable last year, is finally experiencing financial success as well. Why would Mrs Wang, who nurtured the company to success from the brink of bankruptcy, want or need to sell out to a major luxury goods group? Between her and Alber, Lanvin is a family of two. The family has just taken on a third member, a family trust itself, with a similar long-term mind.
BoF: When considering taking an investment, what are the three most important things a brand should consider?
Exit, exit, and exit. The agreed exit strategy (or lack thereof) is the natural pendant to the potential investor’s motives in making the investment in the first place. Too much time is generally spent on planning the first years of living together and not enough on exit scenarios. For the brand receiving the investment, it is very easy to get blinded by the need for cash or the potential for synergies.
BoF: Do you foresee any oft-speculated industry changing transactions actually coming to pass, like the acquisition of Hermès, Chanel or Armani, or the IPO of Prada?
While newsworthy, I don’t think the shareholder succession at Armani or perennially potential IPO of Prada would be industry transforming events. The Armani empire is a super tanker which is unlikely to change course easily, and the Prada IPO is a financial sideshow – what really matters there is the continued presence of the Miuccia Prada-Patrizio Bertelli dual engine.
The real industry changing events would be the acquisition of Hermès or Chanel, who are better guarded than Fort Knox, or of the Richemont group, and I don’t see signs of that either!
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.
This interview has been edited and condensed.