MILAN — It may not have turned into love yet, but Italian entrepreneurs and designers are shedding some of their proverbial wariness toward finance and private equity funds.
This story first appeared in the January 15, 2016 issue of WWD. Subscribe Today.
Recent transactions include some of the top luxury goods names in the country, from Valentino and Versace to Roberto Cavalli and Buccellati.
In 2014, the Qatar-based Mayhoola for Investments acquired its first men’s wear-only Italian luxury brand, Pal Zileri, from a group of Italian entrepreneurs, including the Barizza, Bellet, Miola and Ghiringhelli families, two years after buying the Valentino fashion house from Permira. Emir Sheikh Hamad bin Khalifa Al-Thani also bought the Four Seasons hotel in Florence from brothers Marcello and Corrado Fratini.
Tamburi Investment Partners SpA, or TIP, in 2014 closed a fund-raising initiative through its new Tipo branch, taking minority stakes in medium-sized Italian companies to help them grow, acting as a figurative “glue,” according to president and chief executive officer Giovanni Tamburi. In 2013, TIP invested in Ruffini’s holding company, Ruffini Partecipazioni, indirectly buying a stake in Moncler, which went public at the end of 2013. Ruffini also allowed The Carlyle Group into Moncler in 2008, selling a 48 percent stake to help grow the brand exponentially. Carlyle exited in June 2014.
One of Italy’s most famous fashion families, the Versaces, accepted to sell a 20 percent stake to Blackstone Group in 2014, aiming to fully develop the brand around the world and publicly list the Milan-based firm. This strategy mirrors that of the Cimmino family, who sold a 35 percent stake in preppy brand Harmont & Blaine to Italian private equity firm Clessidra SGR in 2014. Clessidra has been among the most active funds here, buying a 70 percent stake in Milanese jewelry firm Buccellati from various members of the Buccellati family in 2013 and the Roberto Cavalli company from the designer at the end of April 2015.
Why have Italian families been hesitant before, and are now opening up to the world of finance now? Francesco Trapani, shareholder and chairman at Clessidra, who is also chairman of Cavalli, thinks it has to do with a traditional reluctance to cede control, particularly with family-run businesses. But these small to midsize firms are realizing that in order to grow and thrive in today’s fast-changing and ultracompetitive global market, they need sophisticated managers, new expertise — and additional funding.
Trapani, a former Bulgari ceo who was also previously chairman of LVMH Moët Hennessy Louis Vuitton’s watches and jewelry division, believes Clessidra is in a unique position here, having cultivated the Italian market for years, differentiating the fund from its peers because, in addition to the resources, it also has operative and industrial expertise.
Here, he discusses the way private equity funds can help brands get to the next level.
WWD: What are Clessidra’s assets and strengths?
Francesco Trapani: Clessidra is a different animal in the private equity arena, compared with others, as it has financial as well as corporate and industrial expertise. Medium-sized Italian companies need experience not only in finance, but they also have to map out objectives, strategies, operations, and expand in other countries such as China, launching products with a 360-degree vision. Clessidra is particularly interesting for medium-sized companies.
WWD: Could this lack of operative vision be the cause for Italy’s dearth of luxury conglomerates?
F.T.: The most important stall comes from the individualism typical of Italians, which has prevented anyone from putting together a big group. I myself talked a lot with families before selling [Bulgari] to LVMH, but in the end did not succeed — they are afraid of losing control. This is still the case now, but to put together a luxury group today would need a structure that is not feasible. If someone decides to sell, it would be difficult to buy because the big international groups, from LVMH and Kering to Richemont and Qatar, would not allow it, they have the financial means and they invest to create synergies. Unless different families fuse their activities.
WWD: Renzo Rosso is building his own group with OTB, though?
F.T.: This is different from luxury.
WWD: What drew you to Clessidra?
F.T.: I had held executive roles for more than 30 years, so I was tempted by the opportunity to take on a more varied and entrepreneurial job. The LVMH experience was extraordinary, Bernard Arnault is a fascinating businessman, with qualities outside of the ordinary and very positive, but I wanted to become once again in charge of my time. Clessidra can be an interesting opportunity.
WWD: What are the motivations and guidelines behind Clessidra’s investments, which appear quite diverse?
F.T.: Clessidra is an opportunistic fund, with a focus on Italy. We look at investments in different industries wherever there is a creation of value. It’s normal for investments to be different, but they are more similar than they appear. Taking a majority stake is our rule of thumb, and full governance is generally our model, but there are exceptions. Such is the case with Istituto Banche Popolari, a deal that involved different private equities but all with the same logic. With Harmont & Blaine, we have 35 percent of the company, but we have a relative majority, meaning each shareholder has around 16 percent, so we can appoint the ceo and financial director.
WWD: Clessidra was rumored to be eyeing Versace, but the family did not want to relinquish control. Is that why a deal did not materialize?
F.T.: Yes, I think Clessidra looked at the dossier, but that was before I joined. You can never say never, we wouldn’t usually do a minority operation, but if the company is beautiful and not too expensive, why not? In this case, it was a lot of money without having a majority stake and this is not a fit for Clessidra.
WWD: Could you identify Clessidra’s potential targets?
F.T.: This is a country rich in small and medium-sized companies, often competing against each other, and in fragmented sectors. We intervene on succession issues or flank companies on their investments. They are usually domestic champions based in Italy, but they already have an international exposure.
We can either buy a single company or develop business through the acquisition of firms in the same sector. For example, we publicly listed asset manager Anima, but we created it, putting together many different asset managers. In fashion, this could be done on the production pipeline or with companies that have licenses.
WWD: When and how does Clessidra generally exit its investments? Is the Bourse the most logical exit?
F.T.: Usually the cycle is three to five years. To relaunch Cavalli, it may take five to six years. As for the Bourse, it depends on the moment and the sector, it’s unpredictable.
WWD: How has the market changed?
F.T.: It’s increasingly a global market. More than 30 years ago, if you traveled you would see local brands or some luxury label. Today it’s the opposite. Yes, the market is bigger so there are more opportunities, but there is more competition, business is more complex, so companies need sophisticated managers and financial means. For this reason, entrepreneurs are more open to alliances than before, they are more available. I’ve seen the change over the past 12 to 18 months. They know this will allow them to become more sophisticated and stronger in order to be more aggressive.
Private equity funds can be an important tool also for those that want to keep control. These can even let a fund in with a 51 percent stake, and then maybe go public and the fund leaves with its stake and the former owner buys it back. From the day the fund entered and then exited, the company has grown, is more solid and has more means.
WWD: Is your third fund closed?
F.T.: It’s operative, but it will close in March, we are raising funds. We bought Cavalli, [furniture and design in plastic firm] Arredo Plast and ICBPI [CartaSi credit card platform].
WWD: In its most recent study, Bain & Co. and Fondazione Altagamma reported that the jewelry category grew the most in 2015. You have Buccellati, are you looking at other jewelry brands?
F.T.: We are eyeing many different sectors from apparel to food and financial services, but we don’t have a jewelry label in the pipeline at the moment.