Lion Capital has taken a minority stake in Authentic Brands Group.
The consumer-focused investment firm Lion is known for its current or previous stakes in AllSaints, Jimmy Choo, John Varvatos, Alex and Ani and Perricone MD. It also has good connections with international consumer brands in European markets.
Leonard Green and Jamie Salter still control the majority of ABG. According to Salter, who is chairman and chief executive officer of the brand management firm, Lion’s stake is “around 20 percent.” He declined to provide further details on the transaction, except to say that Lion now has a representative on ABG’s board, as does Leonard Green.
Mutual friends of Salter and Lyndon Lea of Lion Capital thought the two should “have lunch,” which they did late last year. “As you can see, they decided that ABG was a company they would like to have a strategic investment in,” Salter said.
Salter founded ABG in 2010, with the U.S. private equity firm as its backer. There has been talk about ABG eying an initial public offering, which remains an eventual possibility. In the six years since it was founded, ABG’s portfolio has grown to more than 23 known brands, including Jones New York; Judith Leiber; Juicy Couture; Frederick’s of Hollywood; Hickey Freeman; Hart Schaffner Marx; Spyder; Tapout; Marilyn Monroe; Elvis Presley; Muhammad Ali, and Shaquille O’Neal. While fashion is a big component of its portfolio, the company in recent years has been making a bigger push in the extreme sports and entertainment sectors.
Salter said, “We are extremely fortunate to have Leonard Green as our partner and we are thrilled to add Lion Capital as our newest partner alongside Leonard Green.”
Nick Woodhouse, ABG’s president and chief marketing officer, said, “Between Lion and Leonard Green, it would be hard to find two better partners with the tremendous amount of resources that they have to get what needs to be done.”
Jonathan A. Seiffer, senior partner at Leonard Green said, “Jamie and his team have built an incredible business in a short time, and we are genuinely proud of all the company’s success.” Seiffer added that the Los Angeles-based private equity firm is “excited to have Lion partner with us and management.”
Lyndon Lea, partner at Lion, said, “After spending time with Jamie and the ABG team, I have gained a tremendous respect for the platform the ABG team has built.” Lea added that he and Salter “saw appealing synergies between ABG and Lion Capital and our investment represents an exciting next step for the development of ABG.”
What that next step is could be interesting. Both Lion and ABG have different strengths.
Salter said, “When we look to partner with someone, it’s not about the money. Money is just a scorecard. It’s about finding a strategy that can help ABG grow its portfolio and EBITDA [earnings before interest, taxes, depreciation and amortization].”
Over a five-year horizon, ABG aims to double its EBITDA in the next three to five years. “Our goal is to be over $10 billion in retail revenues on a global basis within the next five years,” Salter said. Since the company is privately held, Salter declined to disclose current EBITDA. When ABG acquired Jones New York a year ago, it was estimated that the acquisition brought the group’s portfolio to more than $4.5 billion in retail sales.
For firms such as ABG, new licensing agreements for brand extensions into different categories and expansion into territories outside of where a brand is are two ways to grow. But the biggest way to grow remains via acquisitions, and Salter has already said ABG remains in the hunt for more brands.
“We are robust with opportunities. There’s certainly not enough time in the day to get them all done. We are on a very aggressive acquisition path, and will continue on that path over the next 24 months,” he said. Salter explained that a priority is organically growing ABG’s existing portfolio because “we have a lot of low-hanging fruit with the current brands we have now,” while looking at acquisitions at the same time.
That’s where the synergies Lea noted could come in handy for both firms. With Lion’s deep European roots, it can open doors to retail partners for ABG’s existing brands, as well as for potential deals on the other side of the Atlantic.
For Lion, Salter’s proven ability to grow ABG would provide a solid return to Lion on its investment, and the seat on the ABG board provides Lion with a door into the brand management model. Salter said he isn’t concerned that Lion’s team would learn from his know-how and possibly head for the exit sign and become a competitor instead.
“I’m not worried. They have a significant investment in ABG. They are locked with us in this business, just as we are locked with Leonard Green. They are both true partners with us for the short term, medium term and the long term,” Salter said.
Further, Salter can also advise on brands Lion might be interested in that don’t fit into ABG’s model. He is believed to have been consulting with Leonard Green when it acquired Lucky Brand Jeans in 2013 for $225 million.
But even as ABG and Lion work on growing ABG’s reach into the international frontier, there are still questions over whether any of Lion’s investments might find itself under ABG’s umbrella. There have been rumblings that ABG was set to acquire John Varvatos. Salter declined comment, noting only that there have been preliminary conversations about how to grow the designer men’s wear brand. He stressed there is no deal on the table.
But Salter also cryptically said, “This [investment] is sort of phase one of a master plan on how we are going to get to $10 billion [in global retail sales]. We need to complete two more parts over the next year that will really set the platform for us to accelerate everything so we can be even bigger than what we’re doing today.”
Lion exited its investment in apparel firms American Apparel in April 2013, Jimmy Choo in February 2007 and La Senza in January 2012. It still has its investments in AllSaints, Varvatos and Buscemi, the $800-a-pair sneaker brand. The British private equity firm acquired beauty brand Perricone MD in May 2014. It also owns British hair-straightening brand GHD. Lion also acquired Spence Diamonds, a Canadian direct seller of engagement rings, in April 2015 and has been part owner of jewelry brand Alex and Ani since September 2014.