PARIS — Investors are still hungry for brand names, and that means fashion and retail acquisitions in Europe are heating up once again.
But the luxury titans, still groggy from their pre-9/11 spending gluts, won’t headline this round of buying. They’re likely to be on the selling end, as was signaled this month when LVMH Moët Hennessy Louis Vuitton divested its money-losing Christian Lacroix couture business to Falic Group, a U.S. duty-free operator.
In their place a new cast of characters is emerging. Tommy Hilfiger last month purchased the Karl Lagerfeld brand with a view to develop it internationally. Other American houses, including Ralph Lauren and Liz Claiborne, are said to be on the hunt in Europe, according to sources. Claiborne already owns the European fashion retailer Mexx, which it is taking to the U.S.
Chinese investors also have started to prowl. Hong Kong investor Li Ka-shing just bought France’s largest perfumery chain, Marrionaud, and YGM Trading Ltd., a publicly traded Hong Kong firm, recently purchased Guy Laroche.
Yet it’s Europe’s private equity firms, which are flush with cash and eager to get their share of the high-margin luxury pie, that may prove the most acquisitive.
“Private equity funds have definitely become big players,” said Karine Ohana, managing partner at Ohana & Co., a Paris mergers and acquisitions firm. “They have a strong appetite for major brands and they are aware of the existing leverages offered by the luxury sector.”
But don’t expect a case of go-for-broke déjà vu.
Whereas luxury groups often bought merely to secure a brand’s historical cachet — hibernating it while developing cash cow stars — private investors are after quicker profit-making potential.
Unprofitable brands — and there are many said to be on the block — may prove difficult, if not impossible to sell, especially since groups will probably insist on getting prices high enough to cover the multiples they paid.
“What’s changed from pre-Sept. 11, when all of the luxury groups made so many acquisitions, is that there is much more caution,” explained Robert Bensoussan, president of London’s Jimmy Choo, the luxury accessories footwear firm.
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