NEW YORK — Marvin Traub is starting yet another chapter in his storied career. The former chairman and chief executive officer of Bloomingdale's has partnered with Mortimer Singer and Aslaug Magnusdottir to create TSM Capital to invest in designer businesses, brands and retailers in the early stages of their companies, with revenues of between $5 million and $50 million.
And Traub and his partners have wasted no time in their goal to create a portfolio of up to 10 businesses over the next three years. The trio is launching TSM Capital by taking a stake in London-based Matthew Williamson Holdings Ltd. in partnership with investment firm Aronsson Group, headed by chairman Jeffry Aronsson.
Traub, who also is president of the Marvin Traub Associates consultancy, told WWD on Monday that the idea of an investment company evolved over the last five years, when he and Singer worked closely with designers and retailers at his marketing and consulting fi rm.
"Over time, we frequently saw many great companies whom we thought were talented, and who could use funding," Traub explained. "But if you're trying to raise a range of $5 million to $25 million, it's much more diffi cult than if you need to raise $50 million or $100 million. Most of the funds are anxious to make major investments, but much less interested in smaller investments. Yet there are many very fi ne companies who don't need a major investment."
Singer elaborated that many of these companies were looking for financial help, as well as other assistance, triggering the idea to form TSM Capital.
"Often, they would say, 'We need capital, we are growing quickly and we can't keep up with the demand,'" Singer recalled. "We are not just going to invest and sit back and watch it. We are really going to take an active role."
Singer joined Traub's consultancy in 2002, and serves as senior vice president. He was previously at J.P. Morgan Chase & Co. and, before that, worked on launching the U.S. version of the concierge service Quintessentially.
Magnusdottir, meanwhile, joined last November from Baugur U.K., where she had established the business venture unit, which focused on investing in young fashion businesses, including Williamson's, and the PPQ and Criminal clothing lines.TSM Capital will raise money for investments from a group of silent investors, who will not get involved in the operations of the business. It is actively looking at other designers who need to fulfill several criteria, including that the potential acquisition is profitable or should be close to profi table.
"We don't invest in startups, we invest in early stage businesses, which means there needs to be proof of the concept and that there is demand for the product," Magnusdottir said. "We look for something that has a distinctive handwriting, that is differentiated from other things and marketed as such. And we look for a very strong management team that is passionate about building a successful business. We look at brands that have global potential, so we like to see proof not just in one market, but internationally."
She added that TSM could take either minority or majority stakes, depending on the opportunity. "But because of the nature of these businesses at their early stage, they are still very dependent on the designers who founded them or the chief executives who have been involved from the beginning," she said. "We look to obviously keep the designer and the management team and we want them to be incentivized, so we would expect them in most cases to retain a signifi cant stake in the business after we invest."
Last year, Williamson and his business partner, Joseph Velosa, sold 26 percent of their fi rm to Baugur (for more on Baugur, see story on page 12). Under the latest deal, TSM Capital has bought a 22 percent stake, with Williamson and Velosa retaining the remaining 52 percent stake. TSM Capital purchased newly issued shares in the Williamson business, diluting those of existing shareholders, and directly funneling the undisclosed sum it paid into the label.
"Twelve months after selling a minority stake to Baugur, we realized that we were in a position to release more of the company's equity in order to upgrade our business plan — and make it faster and more aggressive," Velosa said. "We had a very fortunate meeting with Marvin Traub about how to accelerate the business, and in the end joining forces with him was a no-brainer. He's got a terrific team with an incredible skill set. With this new investment, we're able to add two more stand-alone stores to our original plan."Williamson had annual sales of 8.1 million pounds, or about $16.2 million, in 2006 and is expecting to close 2007 with revenues of 9.5 million pounds, or about $19 million. The designer is already planning to open a stand-alone store in the Upper East Side of Manhattan in the second quarter of next year, and that opening will be followed by stores in Los Angeles, at the end of next year, and in Paris.
The capital injection by TSM is aimed at growing the 10-year-old brand globally, with a better infrastructure, freestanding retail units, new product categories such as accessories and footwear, and possibly a bigger push in the home arena. Traub will serve on the board of Williamson's company.
The Williamson acquisition was made in partnership with Aronsson Group, and its chairman, the former ceo of Donna Karan International. As a partner in the deal, but not in TSM Capital, Aronsson will take on an active role in supporting the Williamson business going forward,
"Aronsson Group's involvement in this deal is based on the idea that we believe in the brand, the designer and the company," said Aronsson. "Matthew and Joseph have developed a business with a cultlike following which is founded on Matthew's innovative design artistry. [They] have demonstrated an unusual ability to balance the art and science necessary for a successful business in fashion. It only follows that we have high expectations for the profi table growth of this exquisite brand on a global basis."
Meanwhile, socialite and Vogue contributor Lauren Davis has been retained as an adviser to TSM Capital. "She will be helping us from a fashion and style perspective, and look at some of the investments we are making and, on an ongoing basis, she will help us with Matthew," Singer said. "She brings a certain piece to our business which allows us to get into the currents in the fashion world, from her very current perspective."
The trio confi rmed it is looking at a couple of other U.S.-based businesses, but declined to reveal them.
"I think we will keep [the portfolio] small," Magnusdottir said. "There aren't that many brands that fulfi ll our criteria. We also want to make sure we have enough time to pay attention to each and support them in a way that they need to be supported. I would expect us to invest in between five to 10 businesses over the next three years."
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