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The new owners of GarfieldMarks, which has changed hands for the fourth time in seven years, think they finally have a winning formula of private equity and strategic partners.
Li & Fung (1937) Ltd., a private investment vehicle affiliated with sourcing giant Li & Fung Group, and Rousso Apparel Group Inc. last month acquired the assets of GarfieldMarks LLC, including bridge and better lines GarfieldMarks and Womyn, for an undisclosed sum. Li & Fung and Victor Rousso, president of his family’s $200 million apparel business, bankrolled the buyout of six former Harvé Benard executives who had bought the firm. Rousso Apparel Group is managing the business as operating partner.
“It’s a unique transaction in that it is a blend between the private equity world, with Li & Fung, and a strategic deal on our end,” said Rousso, who became chief executive officer of GarfieldMarks. “A private equity company can’t go into every company because, while they can make an investment in a company, they can’t manage their investment. This partnership allows us to widen the scope of businesses we can invest in.”
Rousso and Michael Hsieh, president of LF USA Investments Inc., an investment arm of Li & Fung, both individually had been interested in GarfieldMarks, and they were introduced by Andrew Postal of MMG, who orchestrated the deal and saw it as the perfect partnership, Rousso said.
Rousso Apparel Group manufactures moderate and better women’s sportswear under the Oleg Cassini, Naturally Organic World and Mifresia labels, among others. Better lines make up about a quarter of its $200 million in sales. The vendor is trying to grow this higher-margin side of the business through more acquisitions like GarfieldMarks, which capitalize on Rousso’s back-office operations while keeping the product sides of acquired companies intact.
“A company like GarfieldMarks, the size it is, it is much more costly to stand alone,” said Howard Sheer, president of GarfieldMarks. “With an organization like Rousso backing us, it allows us to just focus on products, sales and marketing.”
Sheer has had an eventful year. Harvé Benard Ltd. acquired a majority interest in New Frontier, the women’s casual better sportswear brand he founded in 1990, from the Windsong Allegiance Group LLC last January. Sheer became president of Harvé Benard, and a few months later, with five other Harvé Benard executives, bought GarfieldMarks. The companies shared a back office.
Almost the entire GarfieldMarks workforce moved over in the deal. But Rousso’s back office replaced much of the operations end, including chief financial officer Harvey Schutzbank, one of the Harvé Benard executives to buy GarfieldMarks. After the end-of-year deal, Rousso created a group to expedite the integration of GarfieldMarks.
“We worked on a couple of Saturdays before Christmas,” Rousso said, adding that within two weeks, GarfieldMarks was up and running and had already shipped $3 million.
The goal is to double sales in the next two years to $60 million — the brand’s peak in the Nineties — by improving shipping, customer service and advertising, and expanding product offerings, including licensing. This is a long-term investment, rather than a private equity-style three- to five-year plan, Rousso said.
“The short-term goal is to get it back where it grows,” Rousso said. “Then we will look to expand horizontally, not to take it downstairs.”
GarfieldMarks jackets wholesale from $165 to $190 and pants sell for $80 to $95. The more casual Womyn line wholesales at $64 to $85 for pants and $85 to $115 for jackets.
“There wasn’t a lot that needed repair in terms of the product,” Sheer said. “It’s selling in the stores, so it’s all about getting the stuff out there.”
Sheer plans to add New Frontier-inspired suede and leather pieces, plus more tops, to the Womyn line.
“The Womyn line is built on pants and it has an amazing following, but people want things to go with those pants,” he said. “The Womyn line has huge amounts of upside.”
Founded in 1993, GarfieldMarks peaked in the Nineties. Because of shipping problems and other difficulties, sales are now estimated at less than half the peak figure. Brand co-founders Alex Garfield and Bernie Marks sold half of the company to Pegasus Capital Advisors in 1999 for $26 million and soon left the firm, maintaining a 50 percent stake. Garfield returned in August 2004 when Jones Texas Inc., along with other financial groups, bought it for about $70 million. Plagued by poor fabric and design decisions and other problems under the new management, the company could not afford even to buy the fabric to fill orders. A crisis management team came in and the Harvé Benard executives bought the business for about $3 million. Soon after, Garfield departed.
But Harvé Benard and GarfieldMarks weren’t a good match, Sheer said. He and the other new owners inherited strained relationships with the lines’ suppliers and as a result they had trouble shipping on time. In September, Wellington Capital Group, a New York equity firm, bought Harvé Benard for $12 million, and GarfieldMarks was left searching for a buyer. When speculation about a sale surfaced in December, banks froze the firm’s loans, so the Dec. 22 deal was welcome.
“Harvé Benard never provided us with that back end,” Sheer said. “With Harvé Benard sold, there were a lot of people very interested in GarfieldMarks, but we needed someone on the operating end. After our experience with Harvé Benard, my expectations were much lower, and [being managed by Rousso Apparel Group] was really an eye opener. Everyone feels very excited and confident.”