LONDON, United Kingdom — Private equity firm Apax Partners has acquired a majority stake in MatchesFashion in a deal that valued the company at a reported $1 billion. The news follows reports of a fierce bidding war for the luxury e-tailer, which attracted interest from Apax, Bain Capital, KKR and Permira. MatchesFashion founders, Tom and Ruth Chapman, as well as existing venture capital backers Scottish Equity Partners (SEP) and Highland Europe, will retain minority stakes in the business.
"We are delighted that Apax Partners have taken a majority stake in the business," says Tom Chapman, co-founder of MatchesFashion.com. "After 30 years of growing this business Ruth and I are ready to take on new challenges while remaining shareholders and taking on an advisory role. Our world class team led by CEO, Ulric Jerome and CFO, Fiona Greiner will continue to drive MatchesFashion to becoming the number one luxury fashion commerce company in the world."
Gabriele Cipparrone, a partner at Apax Partners, added: "We are delighted to have the opportunity to work with what has emerged as one of the leading players in the online luxury space globally. Tom and Ruth, along with Ulric and his management team, have done a tremendous job in expanding the business in a sector that continues to demonstrate huge growth potential. Online penetration of the luxury market is still small and we anticipate this will grow significantly in the coming years. MatchesFashion, with its distinctive assortment, unique voice, and unparalleled customer service, is ideally placed to attract and encourage this growth in the online luxury market."
While terms of the transaction were not disclosed and the sale is subject to customary closing conditions, the deal is expected to close in Q4 2017.
The acquisition comes five years after MatchesFashion raised £32 million ($51 million) in funding from SEP and Highland Capital Europe. In March, MatchesFashion released its financial results for the first time, revealing 61 percent year on year growth in 2016, with an uplift in revenues in all markets. EBITDA hit £19 million, nearly six times more than the previous year, and 2016's total online sales were up by 73 percent.
The company was founded by the Chapmans in 1987 as a brick-and-mortar store in London's Wimbledon. The couple stepped down as joint chief executives in 2015, becoming joint chairmen. Today, MatchesFashion generates 95 percent of its revenue online (it has four physical stores and a private shopping townhouse in London, with a multi-level flagship scheduled to open in Mayfair this autumn).
It has enjoyed growth in a digital world where the likes of My-Wardrobe and Style.com failed — a success attributed to its unique mix of established and nascent designer brands. It has also placed focus on improving customer experience: this year, it introduced 90-minute delivery in London, and has invested heavily in technology with a mobile point-of-sale app that will log every interaction both in-store and online — the aim is to give the company enhanced visibility as to how the consumer behaves, allowing MatchesFashion to tailor the retail experience to each individual.
It's advantageous data to have in a competitive luxury e-tail market — one that is growing fast. Currently, 8 percent of luxury goods sales happen online, but this is expected to hit around 25 percent by 2025, according to Bain & Company. In the coming years, much of the industry's growth is expected to come from digital sales.
And while the wholesale retail model comes with significant inventory risk, MatchesFashion also has growth potential in its own private label Raey. The label, which was relaunched in 2014 with an in-house team headed by creative director Rachael Proud, has introduced menswear and this year opened its own standalone boutique in Notting Hill. The label's advantage is a competitive price-to-quality ratio and it comes with far better margins than wholesale for the company.