By  on May 18, 2007

NEW YORK — Thirty-one floors above Fifth Avenue, and a stone's throw from a row of tony retailers — including Bergdorf Goodman and Henri Bendel — the view from TSG Consumer Partners' new Manhattan headquarters offers a glittering reminder of the fund's mission: to court luxury brands.

The San Francisco-based private equity firm established the office here, led by managing director Alexander Panos, to continue to scout out prestige beauty brands, and to begin to expand its focus to apparel, footwear, accessories and specialty retail companies.

"These categories share many of the things we look for: high margins, great entrepreneurs and categories that welcome new products, which offer luxury and functionality," said Panos, speaking from the firm's office, located at 712 Fifth Avenue. "They are also categories where working capital challenges exist and where having a strong financial partner is key."

In addition to Panos, the team here includes managing director Yasser Toor, who also transferred from the San Francisco office, and Melis Kahya, an associate who previously was an investment banking analyst at J.P. Morgan, specializing in the consumer, retail and apparel sectors.

In beauty, the firm has invested in Smashbox Cosmetics, N.V. Perricone M.D., Alterna Professional Hair Care and PureOlogy, a salon line for color-treated hair that was purchased by L'Oréal last week. The firm also recently sold vitaminwater and Voss water, and expects to close a deal for Smart Balance, maker of trans fat-free spreads, shortly.

"We have four great [beauty] brands that lead us to consider other luxury brands," said Panos, adding that while there are other beauty partnerships in the pipeline the firm is opting for a cautious and deliberate pace to expansion.

Panos said the firm generally targets companies with more than $50 million in manufacturer sales, where the founder is at the helm, backed by a strong management team. Also essential, he noted, is a company that does business in high-growth and profitable retail channels. For beauty brands, those channels include the Internet, television and specialty stores.

"The Federated-May merger has been challenging for many companies because of store closures, so specialty retail has been a big opportunity, as have HSN and QVC," said Panos. "For apparel, we are looking for companies that are profitable and growing, and have the opportunity to have their own stores and to license into multiple categories."

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