Not long after Valentino Fashion Group was acquired by Permira in 2007, Escada AG is the latest major European fashion company to find itself in the crosshairs of a private equity firm. The German newspaper Handelsblatt is reporting that Apax Partners is considering taking a stake in the the German fashion company -- and possibly looking to execute an outright takeover.

Escada's stock lost more than one third of its value in 2007, and another third of value was obliterated in the first few months of 2008, making it a very ripe target for acquisition. But any Escada-turnaround effort backed by private equity will not be easy, even if the price is cheap. Last week, Escada reported that its sales continued to slide in the first quarter of fiscal 2008: revenues across its Escada and Primera divisions dropped by more than 10% when compared to the same quarter in 2007, and EBITDA, a measure of profitability and cash flow, fell by almost 70%.

To complicate matters, the core Escada brand has lost any fashion relevancy that it may have once had (did it ever? You tell us). Traditionally, Escada has gone after a mature fashion customer and counted Chanel and some of Giorgio Armani's more expensive and conservative brands amongst its direct competitors (Armani has created a highly structured brand portfolio divided into different style and price segments.) But of late, Escada has struggled to keep up with the heavily-image driven brands like Chanel and Armani and has also lost share to Akris, a high-quality womenswear brand from Switzerland, which some people are calling the new Armani. The company has also failed to tap into the accessories market, which has grown in importance over the years.

What's tougher for a private equity company: Breathing new life into a dying brand like Escada or sustaining the momentum of a legendary designer like Valentino without the designer himself?

In any interesting twist, Escada CEO Jean-Marc Loubier hired a former designer at Valentino, Damiano Biella, as its head designer, just before Mr. Valentino stepped down in January.