Tory Burch is about to reshuffle the shareholder deck.
And Bank of America Merrill Lynch was tapped to look after Burch’s interests.
Representatives for the company, as well as Bank of America and Goldman declined comment. Tresalia could not be reached.
The addition of investment bankers formalizes a process that’s been brewing for at least a month and could see a significant turnover in the brand’s investor base.
Tresalia holds roughly 20 percent of the company’s stock and has the most to gain among the brand’s outside investors, having bought in when the brand was much smaller and valued at closer to $1 billion.
By the end of 2012, the company was valued at $2.25 billion when investors BDT and General Atlantic came in and cashed out most of the stake held by Burch’s ex-husband, Chris Burch. A series of 2015 stock swaps then established a valuation that sources pegged at $3.5 billion.
That last valuation might not have held up — much has changed over the past three years with e-commerce increases and declines in foot traffic generally hurting brands operating in the segment.
But the brand is well-respected, the company has been growing steadily and business is said to have been good last year, making it a reasonable time for Tresalia to make its move.
Two sources said General Atlantic might piggyback on the Tresalia process and also sell, especially given that five years marks a relatively mature private equity investment. A spokeswoman for General Atlantic declined to comment.
While the exit of multiple shareholders would put a significant stake of the company into play at once, Burch, who leads the firm as chief executive officer, is said to have commanding control of the firm’s shareholder voting rights.
Still, Burch could face something of a balancing act as she seeks to find a buyer who is both acceptable to her and willing to pay a price that will satisfy the investors checking out.
One source said, “It’s very likely that somebody comes to the table that Tory doesn’t like, but is willing to pay a price and then you’ve got to do a huge battle.”
Then again, many investors would think twice before making a big investment in the company without the backing of the founder, designer, ceo and well-known face of the brand.
And Burch has played this game before — and well. She has successfully swapped out investors and brought in new partners with new skills that can help advance the business. Market observers assume the contracts governing the outside investments give her some sort of influence or veto rights over who can buy in.
Nor is she the only designer playing the field right now.
Stella McCartney, who set up her firm in 2001 as a 50/50 joint venture with the company now known as Kering, has an option to repurchase her partner’s stake through March 31 and has been mulling her options. (Beyond that deadline, she has put options to buy back Kering’s stake that can be exercised on a set schedule.)
In general, there are plenty of buyers, from the private equity investors sitting on more than $1 trillion in “dry powder,” according to Preqin, an independent firm that provides data and intelligence on alternative assets, to the strategic acquirers looking for growth and new ways to draw shoppers in a rapidly shifting landscape.
But the picture in fashion is mixed.
The beauty M&Amarket remains red hot, with brow maven Anastasia Soare said to be weighing offers of $2.5 billion to $3 billion for Anastasia Beverly Hills. And all manner of beauty indie brands are being courted by strategic players and financial investors.
Beauty has the benefit of brands that have successfully turned social media into a forum for sales and a gaggle of established operators — from Coty Inc. to L’Oréal to The Estée Lauder Cos. Inc. — that are ready to snap up concepts resonating with shoppers.
Apparel has been more hit or miss.
In some rare instances, still-small gems are being rewarded, as was the case when Carlyle bought half of the ultra-hip skate brand Supreme for $500 million last year.
Elsewhere, well-known brands with cash troubles have found new homes, for instance when Fosun swooped into buy control of Lanvin.
Healthy, established businesses fall into a different and in some ways more challenging category. They require larger investments that can mean raising debt when investors are still wary of fashion brands with brick-and-mortar businesses.
Much of the dealmaking in this area comes from strategics looking to fill out their portfolios, such as Coach Inc.’s deal to buy Kate Spade or Michael Kors Holdings acquisition of Jimmy Choo last year.
There has been talk in the past of Burch at least toying with the idea of a sale to a larger company, but she’s always opted to stand her ground and stay firmly in charge of her own brand.