HONG KONG, China — As the head of John Hardy from 2003 to 2014, Damien Dernoncourt helped drive a quadrupling of the brand's annual turnover, from $18 million to $76 million. However, the period was not without its challenges, including a serious dip in sales after the 2008 financial crash. In the end, Dernoncourt oversaw a majority sale to LVMH private equity arm L Catterton in 2014 — a deal that valued the hand-crafted jewellery firm at more than $100 million.
“The growth was never linear and the business was in jeopardy when I arrived, with no one understanding it was on the verge of collapsing,” recalled Dernoncourt. “All the ups and downs at John Hardy made me realise that creative-led businesses needed hands-on operational support to build well-paced and long-term sustainable growth.”
Now, Dernoncourt is launching a new venture. The Naga Group will fuel the development of accessories, jewellery and beauty brands generating between $5 million and $25 million in sales that require support to scale. Dernoncourt has enlisted investor and executive Sagra Maceira de Rosen — who spent years at top firms including Morgan Stanley, JP Morgan and Reig Capital Group and was also chief executive of Amanda Wakeley — to serve as Naga’s non-executive chairperson.
In the past year, Dernoncourt has searched for worthy investment opportunities, interviewing nearly 260 founders before narrowing the list down to 15 brands worthy of further examination. Naga’s first deal is with niche French beauty brand Talika, of which it has acquired a “significant” stake. (The terms of the deal were not disclosed.) In early 2018, Naga will announce its second investment, a jeweller.
The idea is to create a collection of businesses that will benefit from the support of a group. “If you’re [doing] $5 million [in] sales, you have proof of concept. Over $25 million, and you have private equity hunting for good deals,” said Dernoncourt, who aims to own between 40 percent and 80 percent of each company. "If it’s less than 40 percent, you’re creating value for somebody else. More than 80 percent, and we’re not giving the right incentive for the founders." The goal is to help these businesses reach $15 to $50 million in sales. "This is where we have the skills," he added. "And in my view, it’s the fun part.”
We're not going to buy a business unless we're 100 percent behind the creative vision.
With more than $50 million in capital raised from unnamed family offices and other private investors — as well as members of Naga's executive team — Dernoncourt and Rosen are also determined, at least for now, to focus their investments on three core categories: accessories, jewellery and beauty. These are markets that are not as reliant on seasonality as apparel. “In ready-to-wear, if you don’t have the right blue, you’re not going to a move a piece,” Dernoncourt said. “We’re focusing on what we understand.”
The group plans to write checks of an average $15 million, building a portfolio of eight to 10 brands, which means they will need to raise another $70 to $100 million. “The first step is to transform, focus and nurture Talika and the other brands we plan on investing in over the coming months,” Dernoncourt said. “Yes, we plan on continuing our fundraising effort, but we are not in hurry.”
Like Rosen, the executive team running Naga has covered plenty of ground. The firm’s partners include chief financial officer He Shen, a veteran of Lloyds, as well as chief operating officer Meg Park, who joins from Goldman Sachs. Sandro Brodbeck — who previous worked on Swarovski's M&A team — will lead investments, while Patrice Brendle — former chief executive of the Hagemeyer-Cosa Liebermann Group’s Asia-Pacific Luxury Division — oversees business development.
David Lipman, a creative who has worked with Burberry and Dior, is in charge of marketing and branding. Zolika Courcol-Lebtahi, whose CV includes Chloé and John Hardy, will lead merchandising. Finally, Alfred Tong and Aymeric Bonduel, two of Dernoncourt’s former John Hardy colleagues, will be in charge of finance, operations, supply chain and IT.
Together, this team will provide across-the-board assistance to the company’s stable of brands.
First up is Talika. Founded in 1948, it is best known for “eyecare” products, many of which are meant to aid in eyelash and eyebrow growth.
“Talika is a double-digit business also growing at a double-digit pace,” Dernoncourt said. “China is small — hence the opportunity — but Asia represents close to half of the business and travel retail a quarter of the business. We believe we can quickly double [sales] and, in the long run, we see China as the main market for the company.”
Owner Alexis de Brosses will remain with the company. “We want good brands with good founders, that have room to grow in the US and Asia,” Dernoncourt said. “The more people we met, the more we fine-tuned our business model.”
Naga is just the latest budding luxury group to emerge. Earlier in 2017, former Labelux chief executive Reinhard Mieck launched For the One in the UK, while Assembled Brands — which owns The Line, Protagonist and Khaite, among others — is making a go of it in the US. (As are public companies Tapestry and Michael Kors.) Perhaps the greatest challenger to the "big three" European conglomerates — LVMH, Kering and Richemont — that have dominated the luxury goods industry for the past 20 years is Mayhoola, the Qatari Royal family-backed investment vehicle that owns fashion brands including Valentino and Balmain.
Each of these groups, like Naga, believe that pooled resources will create synergistic advantages. What perhaps distinguishes Naga is its investment philosophy and proposed brand mix. "They have a very similar cash conversion," Dernoncourt said of the three core categories the company is targeting. "At the same time, we're very much driven by creativity. That's the big difference between us and the private equity world. We're not going to buy a business unless we're 100 percent behind the creative vision."