Whoever said “where there’s smoke, there’s fire” knew nothing of the private equity market.
LVMH Moët Hennessy Louis Vuitton–backed investment vehicle L Capital Management, which specializes in midmarket fashion and lifestyle brands, is a case in point. Barely a week goes by without the firm being linked in the press or by rumor mills to this or that company.
But when Daniel Piette, L Capital’s chairman and an LVMH collaborator for the past 21 years, describes the process involved in selecting the firm’s investments, it becomes clear that it’s not quite so simple.
“Experience has proved that you have to look at about 150 projects to find 75 that are worth a closer look, which leads to making around 10 offers, and those 10 offers will result in two or three investments, no more,” he says in an interview in his Paris office.
L Capital Europe revealed in February that it had closed its third round of funding, worth 400 million euros, or $531 million at current exchange, and a new guessing game began.
Piette remains tight-lipped about his plans for the third fund, saying that almost nobody outside the firm gets to know about its investments before they happen. He reveals, though, that L Capital is looking at lingerie and catering businesses as well as a jewelry and watch company.
L Capital maintains something of a niche—specialized in investments in the fashion, accessories, cosmetics and lifestyle sectors as well as selective retail—and Piette claims that its positioning is unique.
“I do not know of any other multinational specialized funds in the midsize-company segment,” he says. “Traditionally, international private equity firms are multi-industrial, while specialized funds are almost always national. We are a specialized fund with a global purpose.”
“This is our will, but it is also due to where we come from: LVMH Group. Our vision when the firm was created in 2001 was primarily not to interest ourselves in other product families than those produced by our sponsor, even if we [have] focused our investment strategy on affordable luxury, and not on core luxury brands.”
According to sources, midmarket European companies that might be looking for financing include U.K.-based retail jeweler Aurum, French dancewear and shoemaker Repetto, lingerie maker La Perla and high-end linen brand Frette.
“We try to look at businesses that are solid, with a strong history, good growth and profitability,” Piette says. “We do not do business turnarounds. We do not do venture capital.”
Piette anticipates investing in an average of two businesses in Europe each of the next three to four years through the new fund.
L Capital helps the companies it invests in with strategy, recruitment, retail development and international expansion, he notes, something that a nonspecialized firm would be less equipped to do.
“Being close to LVMH also brings us access to its prominent expertise in developing activities and networks on external markets,” Piette says. Since L Capital’s 2010 purchase of a stake in French company Groupe SMCP, which controls contemporary fashion brands Sandro, Maje and Claudie Pierlot, the three brands have significantly expanded their retail footprint, notably in the U.S. “This year, I think we will have increased the revenues of the company by 70 percent since 2010,” Piette says. “Its performance is excellent.”
Other firms currently in L Capital’s portfolio include Spanish denim house Pepe Jeans, accessories licensee TWC L’Amy Group, Italian denim manufacturer Dondup, furniture maker Calligaris, U.K.-based Princess Yachts and French apparel direct seller Captain Tortue.
As for selling any of its investments, Piette offers that, “When we sell a business, it is always because we think we are going to make a certain capital gain. Clearly, the higher the better, but we are very satisfied when we sell a company that allows us to make two or two-and-a-half times our initial investment.”