Marquee Brands has a shopping list in mind for future acquisitions to build out its portfolio.
Neuberger Berman Private Equity established the brand management firm in September 2014. Under the leadership of president Michael DeVirgilio and chief operating officer Cory M. Baker, Marquee made its first two acquisitions last year. The firm acquired Bruno Magli in January 2015 for $33.6 million, and Ben Sherman that July for $63.7 million.
According to DeVirgilio, the firm at the outset brainstormed with its key retail partners to get a reality check on what brands they would like to see in their stores. “We engaged with all the major retailers, analyzing what’s on their radar. That’s number one. They gave us their shopping list, which allows us to be more focused.”
He explained that the strategy helps the firm work with its key partners to “drive their strategy. It makes no sense to go out and make an acquisition and then have to convince a retailer that the brand is relevant.”
And while the retail landscape is in flux, DeVirgilio said that has less impact on the type of brands that it might choose to acquire. “Good brands are good brands,” he said. “It’s the way you access the consumer that’s changing. Is the brand able to reach consumers in nontraditional forms? That’s the key.”
Baker said Marquee works with a dedicated team at Neuberger, making the combined efforts of the Marquee team and those from Neuberger “more robust than our competitors today.” And while there’s been a common theme among some investment bankers and financial and strategic buyers that there haven’t been many really good brands at fair prices available for sale, Baker is quick to dispute that: “There’s no shortage of brands, and our competitors are welcome to take any of them. We look at it through a different lens.”
Brands need to matter, but that could mean different things, depending on whether the point of view is luxury or the mass retail channel, Baker said. What’s key is that the brand resonates with the consumer and is part of people’s lifestyle. Further, Marquee is OK with brands that need a bit of fine-tuning to turn around operations.
“It depends on what you mean by a turnaround,” Baker said. “Most things on sale require some turnaround. Most important is whether what’s required is under the hood or in the eye of the consumer. If it’s a tarnished brand in the eye of the consumer, that’s not for us.”
Samuel Porat, managing director at Neuberger, said, “Bruno Magli is a classic example of a brand that was damaged financially. We brought the company out of bankruptcy, but the consumer wasn’t aware of that. A few years ago, the brand had one of its best years, then it took a turn for the worst because of the way the business was managed.”
According to Baker, Bruno Magli around 2011 had annual volume of $250 million worldwide, focusing on men’s and women’s shoes, and a much smaller line of small leather goods. “By the end of this year, product categories will include men’s footwear, shirts, ties, small leather goods, women’s footwear, women’s handbags and watches, along with territory expansion across Latin America, Japan and an e-commerce site. We are set to launch 65 freestanding stores by 2021. We’re focused on achieving $350 million in sales over the next four to five years,” Baker said.
At the same time, the company is working to achieve that same magic with its Ben Sherman brand. With about $150 million in annual volume at the time of its acquisition, Marquee has added categories and product extensions. The retail plan calls for between 52 to 150 retail doors over the next four years, with the goal of reaching annual volume around $450 million, Baker said.
What also makes Marquee unique among its competitors is its financial sponsor, Neuberger, which in February disrupted how brand management firms are financed through the closing of a $462 million fund earmarked solely to Marquee Brands LLC. That dry powder gives Marquee an advantage as it can move forward on any deal it chooses with certainty that it can close on the transaction quickly, without any contingencies required for financing.
Zachary P. Sigel, a principal at Neuberger, who with Porat pore over much of the analytical details and due diligence connected with potential deals, said, “The model at Marquee is to have a long-term view with everything that we acquire. We’re looking out three, four or five years on what the brand can be. Every single brand that we acquire needs to have organic growth potential.”
Sigel said the plan is to build the portfolio to a dozen brands over the next three to four years. “We can scale smaller if we think there’s great growth potential, and there’s no acquisition that’s too big if it was the right one,” he said.